NEW YORK (CNNMoney.com) -- Morgan Stanley and JPMorgan Chase are the leading candidates to handle the underwriting of an initial public offering for General Motors, according to published reports.
A move to settle on underwriters would suggest that GM is getting closer to filing for an IPO. A sale of GM stock to the public would help taxpayers start to recoup most of the money GM received as part of a federal bailout.
Still, an offering will not take place before the fourth quarter, according to the Treasury Department, which holds a 61% stake in the company.
Morgan Stanley (MS, Fortune 500) and General Motors declined to comment on the reports in the Wall Street Journal and the New York Times, while a spokesman for JPMorgan Chase (JPM, Fortune 500) was not available for comment.
It would make sense that Morgan Stanley is in the running. GM's vice chairman Stephen Girsky was formerly a managing partner at Morgan Stanley.
The Treasury Department also refused to comment on the reports but issued a statement late Thursday that said the selection of underwriters would be GM's decision.
Treasury added though that the choice of banks would be subject to the department's "agreement that the selection is reasonable." It also said that Treasury, not GM, will determine the fees paid to underwriters.
Both Morgan Stanley and JPMorgan Chase received their own federal bailout funds Treasury in 2008, although all that money has since been repaid. Still, the department likely has a fair amount of leverage in negotiating fees for the IPO with the banks.
But even a fee of 1% of the offering would likely generate more than $100 million in income for the firms -- assuming that GM sells at least $10 billion worth of stock.
Independent International Investment Research estimates that the GM IPO will raise $12 billion, which would be enough to make it the second largest U.S. IPO on record, behind only the $17.9 billion IPO for Visa (V, Fortune 500) in 2008. It would be about 10 times the size of the Google (GOOG, Fortune 500) IPO in 2004.
The IPO is a key step for the Treasury Department being able to recoup some of the remaining $44 billion in taxpayer money the automaker has yet to repay.
While GM has repaid $7 billion in loans it got from treasury, Treasury received $2.1 billion in preferred GM shares along with the 61% stake in GM's common shares in exchange for the help.
The Treasury Department is expected to sell some, but not all, of those shares in the IPO. Experts say it will take months, if not years, for the government to sell its entire stake.
GM shares would need to have a market value of $69 billion in order for Treasury's common shares to recoup their portion of the bailout money. Numerous analysts last month estimated GM's total market value at between $64 billion and $90 billion.
But it may prove difficult for GM to reach that value. The company's peak market value was $61.3 billion in May of 1999, according to research by the Center for Research in Security Prices at the University of Chicago.