General Motors raised $20.1 billion in the biggest U.S. initial public offering in history, pricing the shares at the top of the proposed range in response to huge investor demand.

GM sold 478 common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

Including an overallotment option, which will be settled over the next few days, GM looks set to raise $23.1 billion — the biggest initial public offering ever.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy with sharply lower costs and higher profit potential.

The successful IPO means the U.S. government’s stake will immediately drop to 33 percent. It could fall further if certain warrants are exercised in the coming years.

“You’re not in GM for a three-month investment,” said Tim Leuliette, a director at Visteon Corp and longtime U.S. auto industry executive, speaking at the Reuters Autos Summit.

“You’re into GM because a critical element, a critical building block of the U.S. economy, has significantly repositioned itself to be competitive.”

FROM BLUE-CHIP TO BASKET CASE

The stock sale represents a step toward taxpayers recouping a $50 billion U.S. government rescue of the 102-year-old company, which had fallen from blue-chip status to bailout basket case in recent years.

The Obama administration’s GM restructuring angered many and critics started referring to it as “Government Motors.”

GM earned $5 billion in the first nine months of 2010 and is on track for its first full-year profit since 2004.

The automaker has cautioned that fourth-quarter profit will be slimmer because of vehicle launch costs and a higher proportion of less-profitable small cars in its mix of production. GM’s European unit also remains unprofitable.

In a road show for investors spearheaded by GM Chief Executive Dan Akerson and Chief Financial Officer Chris Liddell, the automaker has emphasized both its sharply lower costs and its exposure to key growth markets like China.

One of the open questions remains whether GM’s China partner, state-owned SAIC Motor Corp Ltd, will participate in the IPO and how much it will invest.

The two companies have negotiated new cooperation in areas such as electric car programs in talks that began this summer. Under a tentative deal, SAIC had agreed to invest between $500 million and $1 billion in GM pending Chinese government approval, people with knowledge of those discussions said.

But two people familiar with the matter said that as of early Wednesday, China’s Ministry of Commerce had not approved the SAIC investment.

Sources previously told Reuters that sovereign wealth funds in the Middle East and Asia separately had committed a combined $2 billion to GM’s IPO.

GOV’T TO REMAIN BIGGEST OWNER, FOR NOW

Treasury will remain GM’s largest shareholder after the IPO. U.S. officials have said it is likely to take until the next presidential term for the U.S. government to sell off all of its holdings in GM.

If the IPO prices at $33 per share, the U.S. government will need to see the stock rise by 47 percent to just above $48.50 — about what it costs to fill the gasoline tank of a 2010 Chevy Malibu LS 4-door sedan — to break even on its follow-on stock sales over the next several years.

At that level, GM would have a market value of more than $90 billion. By comparison, its closest rival, Ford Motor Co , has a market capitalization of $59 billion after a rally that has sent its stock up 65 percent this year.

Obama administration officials have argued that it would represent a kind of success if the White House breaks even only on the $30 billion that it committed to GM. Just over $19 billion in funding came from the Bush administration.

The GM bailout spared the automaker from liquidation and saved hundreds of thousands of manufacturing jobs at the company and its suppliers, officials have said.