GM $25.50 per share?

[LS2JSTS]

All along, I've been fairly optimistic that the IPO would cover a large portion of the initial Federal investment. It looks like GM will be buying a large portion of the shares that the Treasury holds at $25.50/share, estimated as 2% above market value. Almost twice the current market price for Ford stock...IDK if I'd be willing to trade my Ford for GM at a 2:1 ratio. Even I think this price is a bit high...What say BITOG?

http://www.freep.com/article/20101029/BU...bt-ahead-of-IPO

 

[javacontour]

It depends on how many shares are outstanding for each company. If there are approximately 2x the number of shares for Ford compared to the new GM, then it may not be a bad deal.

The government may be demanding a premium since they may not be getting interest on the bailout money. So a 2% premium may not be a bad deal for almost two years use of taxpayers funds.

It's certainly a better return than we are getting on the IOUs in the SSI trustfund lockbox, or whatever you want to imagine it really is

 

[LS2JSTS]

I havent seen any figures yet on how many total shares will be issued in this IPO...have you?

Ford, iirc, is right around 3.5 billion outstanding common shares, which doesnt include the Families share held in a special class.

 

[javacontour]

I haven't really looked since I'm not holding individual stocks in my portfolio.

I buy mutual funds and spread my risk over a large part of the market.

Well, I do hold some Oracle, but then they also send me a paycheck

 

[Spyder7]

The only stock I hold (and bonds as well, for that manner) are in a managed pension plan - I'm not concerned with the individual stocks held (since the plan manager decides what's bought and sold, and when), only the performance of the portfolio.

java's point that the price needs to be compared against the number of outstanding share's for both need to be taken into consideration before any kind of opinion on the relative merits of the share price is a valid one.

-Spyder

 

[LS2JSTS]

Thanks for repeating java's point there Spyder. Of course I understand the relationship between market share price and the number of outstanding shares.

My comment regarding a swap, was more reflective of the relative risk involved with both companies that I perceive...nothing more.

 

[Drew99GT]

Originally Posted By: LS2JSTS
All along, I've been fairly optimistic that the IPO would cover a large portion of the initial Federal investment.



http://bailoutsleuth.com/news/2010/10/general-motors-will-repurchase-21/

GM's stock would have to reach $133/share to repay the federal bailout.

The preferred stock price is essentially not comparable to what it's IPO of common stock will be, as the preferred stock was essentially in return for bailout money.

Ford's market CAP right now is around 45 billion (outstanding shares at current market value), essentially what GM owes us! They didn't take any bailout money and they're the most profitable domestic auto maker. So no, I don't think GM's IPO will come any where close to covering a large part of the 45 billion in bailout money.

 

[Y_K]

Why bother? It's doomed anyway. All Gov interventions end with the same result. Short-term vs long-term, risk vs reward..

Remember what the shares are for in the first place: to pay the dividends. Cap is secondary. Apparently we need more blood on the market for folks to realize what different classes of financial instruments offer and what they take away.

 

[LS2JSTS]

Originally Posted By: Drew99GT
Originally Posted By: LS2JSTS
All along, I've been fairly optimistic that the IPO would cover a large portion of the initial Federal investment.



http://bailoutsleuth.com/news/2010/10/general-motors-will-repurchase-21/

GM's stock would have to reach $133/share to repay the federal bailout.



I dont see how that $133/share figure makes any sense. If they issue 2.5 billion shares, the same amount they were authorized to issue at the end of 2008. At $100/per, that would be 200.5 billion dollars. At $25/per that would be right around 50 billion dollars. How does that not cover the debt?

What am I missing?

 

[Drew99GT]

http://blogs.wsj.com/deals/2010/08/20/the-gm-ipo-valuation-how-about-110-to-130-a-share/

That's a good read on the subject.

 

[Drew99GT]

Originally Posted By: LS2JSTS
If they issue 2.5 billion shares
What am I missing?


They're not issuing 2.5 billion shares? Where the heck did you get that figure? GM has 500 million shares and they're not issuing any more. The IPO, from what I've read, will be around 20% of the Treasury's stake in the company.

From the WSJ article, they'd have to have an IPO of $165/share to cover the 50 billion, which would give GM twice the market CAP of Ford!!!

 

[LS2JSTS]

I said in my post, that was the authorized issue back at the end of 2008. And that was before the reverse split that diluted value before the BK.

The 500 million shares sounds way to low...where did you get that number? If you mean the initial release, then that makes sense I guess. But I'm trying to derive what the total issue will be. Over time, once all the issue is released and sold by the Treasury is a more realistic measure isnt it?
If they are only releasing 20%...then what value will the other 80% bring in time?

btw...if they are releasing only 20% and that number is 500 million, then it should follow that the total issue authorized will be 2.5 billion, no?

 

[LS2JSTS]

OK...I see that comment now...I had no idea that the total issue number was that low. Why are they doing that? There is no reason for it, why not issue more stocks? They were authorized for billions more in 2008 and had no problem diluting my stock down to worthless.

Heck....all I do know for sure today, is that my Old GM Corporation stock is worth nothing...lol...that I'm sure of!

 

[Drew99GT]

http://www.minyanville.com/dailyfeed/everything-you-need-to-know/

After the IPO, us taxpayers will STILL own 48% of GM.

http://www.fool.com/investing/general/2010/10/16/is-general-motors-ipo-destined-to-fail.aspx

More good reading. If GM can muster $110/share (a good estimate according to the suits) from the Treasury unloading 20% during the IPO, they're going to cover about 13% of what they owe the treasury.

Bottom line, GMs debt is equal to the value of Ford motor company. That is ASTOUNDING, and they can't make it up simply from issuing stock. The market won't take it. They have so far to go in climbing out of the hole, it's unreal. It's not bashing, it's the god's honest truth. I certainly hope they make it though.

 

[2oldtommy]

you can debate the share price all you want. IMO the real issue is the lack of a track record by the present management team. How many marketing managers and ad agencies have they had in the past year? Can they attract the younger buyers in order to recapture market share? The continued reliance on fleet sales does not bode well for the long term sucess. The buzz around the Chevy Volt is good, but does not make up for the market share loss in the mid-size sedan sector. I would be hesitant to put my money in GM shares at any Price. FWIW--Oldtommy

 

[Spyder7]

The Cruze is looking like it has the potential to be a hit. The Volt is a long term investment that I think is a good one - A company needs not only to meet the needs of today's market, but show some vision and preparation for the needs of tomorrow and I think GM is doing that with the Volt.

As an investment, I would consider GM to be a very speculative one right now as they are very much still in a transition process. An IPO is often high risk anyway, and GM's is no exception IMHO. It could pay off spectacularly (as some IPO's do), but that's a gamble you have to be in a position and willing to take. But then for those who have a well diversified moderate risk portfolio, this might be the perfect thing to add some stock in from the higher risk/higher potential payoff perspective.

But that's just my armchair stock analyst perspective: I leave the heavy lifting to my portfolio manager.

-Spyder

 

[kelpie]

It's a shame how our industries have been run into the ground by free trade.

 

[Ursae_Majoris]

Shoddy workmanship of the old GM, inept executives and greedy UAW ran GM onto the ground, not the free trade.

PS, I am not bashing UAW, there is a plenty of blame to go around.

PPS, my GM/Subaru built Isuzu Axiom is still my favorite car and just keeps on going.

Good luck to GM. I hope they will repay our money, after several stock issues.
I sure do wish they would make whole all those pension plans that got stuck with Old GM. It is not required, but it is a right thing to do. It would go a long way to repairing bridges with American consumers.

 

[Spyder7]

Originally Posted By: Ursae_Majoris

PPS, my GM/Subaru built Isuzu Axiom is still my favorite car and just keeps on going.


Not to pick nits, but GM, aside from being a 49% stakeholder in Isuzu (before Isuzu bought most of that stock back in 2002), didn't have a whole lot to do with the Axiom - which was designed in Japan, and based on the Isuzu Rodeo platform (which pre-dated GM's 49% stake involvement). Even the LIA plant where it was built long predates any GM involvement, as that plant was built entirely based on an Isuzu-Subaru joint venture.

-Spyder

 

[Drew99GT]

One thing GM has going for it that Ford and Chrysler don't, is their overseas market. They're positioned to sell a lot of cars overseas and in South America where high growth is.