GM $25.50 per share?

[LS2JSTS]

I agree that GM is in a good position in foreign markets. But I wouldn't say that position is any stronger outside China than Ford has. Ford for years has been buoyed by profits coming home from their outside NA operations. Without that profit and cash stream coming into Dearborn Ford would be even worse off.

Another example of why profits matter and where they end up IS very important.

Chrysler, well you are absolutely correct. That was the whole idea behind the tie up with MB, up till that point Chrysler had NEVER had any significant overseas operations. I'm sure Fiat sees that as an opportunity to exploit, and they have the cash/ability to make it happen.

 

[dsr70]

Originally Posted By: kelpie
It's a shame how our industries have been run into the ground by free trade.


Much to debate here, but IMO it is the tax, regulatory, and legal climate here that has driven manufacturing away. This nation is openly hostile to business now. It's flat out unfriendly to make things here.

 

[Spyder7]

What would you prefer? Polluted air and water and slave labor? Maybe some things are over-regulated but a lot of the regulations exist for good reason. I agree that lawsuits seem to be a much more common thing in the US than in Canada. One reason I understand that accounts for the difference is that in Canada, the plaintiff, where the law suit is on a matter of health or injury related, can and usually is compelled to disclose his medical records; this can, and often does, mean his entire medical history. This makes it much harder to not only win that type of lawsuit, but it also tends to mitigate any damages awarded. And our courts are nowhere as generous, overall, with cash verdicts as they are in the US.

Maybe you have some valid points, but some type of balance needs to be maintained as well. We were very heavily regulated at one time, and in recent years many of those regulations have been relaxed to allow more competition. At the same time, many assets that were Crown controlled have been privatized. Many of the changes have been good for the consumer (and the economy), while I think some of the things that have been privatized have made us worse off instead of better off. That goes to the balance issue.

You could also take the opposing view point and say that, clearly in some cases, regulations have been too lenient. An easy example I'd point out is the S&L crisis - would that have occurred were lending companies permitted to operate as they have been? Or would certain regulations have prevented it from occurring in the first place? I'd argue the latter, and point to it as a case where (tighter) regulations make sense.

At any rate, I disagree that the US is hostile to business. If matching China on laws and regulations is what it takes to compete with them under free trade, then I'd argue the price is too high: you are not going to find an American willing to work 80+ hour weeks for $10 or $20 bucks a week, nor should they be asked to, as let's face reality and admit that that's what it would mean to compete with China on their terms.

-Spyder

 

[M1Accord]

That price is about 25 dollars too high.

 

[oldmaninsc]

Originally Posted By: M1Accord
That price is about 25 dollars too high.

I agree.

 

[LS2JSTS]

Originally Posted By: 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!!!


I suspected the numbers you were posting were false. And here is the proof. The 500 million shares you quote and use to figure the price per share to cover the debt is completely wrong.

As I said before the issue of stock is much larger than 500 million. The real number is 24%(x)= 365,000,000. The initial shares offered for sale will be 365 million which represents only 24% of the total number of shares outstanding.

The actual number of shares that will be available for eventiual sale is therefore closer to 1.5 billion shares, three times the 500 million you base your calculations on.

1.5 billion times 30/share equals around 45 billion dollars...pretty close to covering the loan, and far from the ludicrus figure of 165/share you quote based on only 500 million shares.

FWIW, the issue price may at this point be above 30/share. The initial offering is already oversubscribed by a margin of at least 2:1, meaning that for every buyer of each share there are more than one potential buyers with an order already in place. GM is considering upping the initial issue by excersizing their green shoe option to meet the strong demand.

http://www.freep.com/article/20101113/BUSINESS01/11130345

 

[LS2JSTS]

Originally Posted By: oldmaninsc
Originally Posted By: M1Accord
That price is about 25 dollars too high.

I agree.


Ahhh, I love it. The same "wisdom" displayed by my friends who laughed at the thought of me loading up on Ford at $2.00/share...lol.

I got news for you, they were wrong then, and you are wrong today. FWIW, if you actually took the time to inform yourself you would/could see that the shares being issued are already over subscribed and reportedly orders at $32/share are being accepted from institutional investors. They must see something you can't/dont want to see.

 

[gfh77665]

You will likely see a speculative "pop" in the stock in the first few days. Carefully note the word "speculative". After that, when investors examine the P/E ratio, look out beloooooow.

 

[LS2JSTS]

"The automaker is getting orders from large institutional investors who are likely to be long-term shareholders at about $32 a share..."

Are these the speculators you are referring to?

The biggest portion by far of this IPO and the remaining shares will be purchsed by large stake holders like the institutional investors, sovereign wealth funds, public and private pension funds...these aren't typically speculators by nature. The speculators will be busy to be sure, but for the most part they will be feeding on the fringes of the real money.

Luckily, this is one of those topics where the truth will soon be revealed...time will tell.

 

[rshaw125]

Any one read George will's column on GM today? the whole 'payback' of loans is just smoke and mirrors. Transfer $ from one account to another. anyone who buys GM is a fool.

 

[Spyder7]

Concerning the IPO being a sound investment, I'm beginning to think LS2JSTS may be right. And this nails the reason why:

Quote:

But I believe the restructuring has set GM up to be extremely profitable. After reducing hourly labor costs, Liddell says that GM will be able to generate as much as $16 billion in free cash flow, and profit margins as large as 10 percent.

Also, a huge element to the government's takeover of GM was a provision that allows the company to hold onto nearly $16 billion in operating loss credits. Over the coming years the GM will be allowed to use these prior losses to offset future tax bills.

Sounds like a pretty good deal right? Essentially the company lost money, then got bailed out and went through a restructuring, but keeps the 'benefits' of losing money in the past.

If you haven't realized the obvious yet, GM is one company that the U.S. government won't let fail. So if you want to invest with the full backing and support of the U.S. government - then you should definitely consider picking up shares of GM when they debut.


http://seekingalpha.com/article/235526-is-general-motors-a-buy?source=feed

The current US treasury stake is 60%, and after the IPO, the treasury is still expected to retain 43% stake in GM.

To me its looking increasingly less like a speculative buy, or like there's much chance the stock will suddenly tank after the IPO - without bouncing right back up and beyond it. As pointed out, interest in the IPO is significant, and I think that will drive the price up artificially high; but worse case it "corrects" and drops a little in value after the hype and stock rush is over, before quickly regaining value again that I think will within a year or 2 exceed the IPO share price.

I would need to read a lot more about this before personally committing anything, but its looking less like 'if' its a good buy and more like when it'll be the best buy: when the IPO hits the market, or shortly after when (if) it goes through an adjustment phase and the share price drops after the early speculation phase but then picks up steam again and surpasses the IPO price.

It is a bit of a shell game. The tax payer has floated the restructuring bill for what looks like a good pay off for those with the money to buy the early public share offerings. But these are two separate issues.

-Spyder

 

[oldmaninsc]

Originally Posted By: LS2JSTS
Originally Posted By: oldmaninsc
Originally Posted By: M1Accord
That price is about 25 dollars too high.

I agree.


Ahhh, I love it. The same "wisdom" displayed by my friends who laughed at the thought of me loading up on Ford at $2.00/share...lol.

I got news for you, they were wrong then, and you are wrong today. FWIW, if you actually took the time to inform yourself you would/could see that the shares being issued are already over subscribed and reportedly orders at $32/share are being accepted from institutional investors. They must see something you can't/dont want to see.



As the age old saying goes "A fool and his money are soon parted!" It's happened before it can and will happen again. Let's check back on this thread in a few years and see what happened! In the mean time dump your money where ever you want, but I'll invest mine elsewhere!

 

[LS2JSTS]

Originally Posted By: oldmaninsc




...fool.... Let's check back on this thread in a few years and see what happened!


Count on it...I'll be around, and so will GM. We'll see who the "fool" is then.

Many "smart" people, including a lot of professional analysts didn't see the value in Ford at under $2 per...fortunately, I'm not one of those "fools".

I defer to Father Time...see you in a couple oldmaninsc.

 

[Spyder7]

I'm not going to commit to it on the Nov. 17 IPO date simply because I haven't followed it closely enough for it to be more than a speculative buy for me right now, having not done all my homework on it first.

I will be watching it closely though, and if the IPO debuts high before sinking a bit after the initial opening craze is over, I may consider it then.

I also think that now is a really good time to buy Toyota stock too, though that's a separate issue. Personally if I buy either I'll buy both just to diversify within the same industry, and with the expectation that both, at least over the next 2-5 years, will increase enough in value to outperform the accepted market indicators.

-Spyder

 

[LS2JSTS]

"Penske encouraged
Roger Penske, chairman of Penske Automotive Group, told The Detroit News on Friday that he plans to invest in GM's IPO. He's encouraged by the comeback of Detroit's Big Three and described GM as a good investment.

"I have been contacted by a broker and I expect to invest in a number of shares," Penske said, adding that the specific number will be determined once the brokerage house he is working with knows how many shares it has been allotted by GM's underwriting banks."

Demand may propel new GM shares above $30

Roger Penske, to me, is like the guy with the Midas touch. I agree with him and not with internets experts that think 25.50/share is $25 too high.

 

[Spyder7]

Originally Posted By: LS2JSTS
"Penske encouraged
Roger Penske, chairman of Penske Automotive Group, told The Detroit News on Friday that he plans to invest in GM's IPO. He's encouraged by the comeback of Detroit's Big Three and described GM as a good investment.

"I have been contacted by a broker and I expect to invest in a number of shares," Penske said, adding that the specific number will be determined once the brokerage house he is working with knows how many shares it has been allotted by GM's underwriting banks."

http://www.detnews.com/article/20101113/AUTO01/11130351/1148/Demand-may-propel-new-GM-shares-above-$30

Roger Penske, to me, is like the guy with the Midas touch. I agree with him and not with internets experts that think 25.50/share is $25 too high.


As this has been more and more talked about, the more I've looked into it, the more I'm inclined to agree with you. My only question is whether or not the speculators will drive the price up artificially for a quick pump and dump.

The initial buyers will make money either way, but if it debuts above actual value because of speculative investment with quick profit in mind, then the price may be better on it shortly after the IPO. Or not. This is a tricky one.

Often times IPOs are hugely undervalued and many have made a killing on them - but they're usually made on much smaller companies whose IPO debuts in the single digit dollar figures. GM, being so big, and making an IPO following a government bailout and restructuring, makes it not so clear cut.

Either way, were I to bet, I'd bet on those buying the IPO making money on it. My only question is as to whether those who wait until the dust settles following the initial offering, will make more - that one is harder to answer.

-Spyder

 

[LS2JSTS]

Because of the way this stock is being issued, in such a limited issue. The speculators will be locked out for the most part by the large Institutional investors that have already lined up orders. These investors that have already lined up are not pump and dump investors by any measure

The stock is already overissued...If the typical small investor even wanted to buy a large chunk, they probably couldn't. They are already in the back of the line behind some heavy hitters.

And really, that is smart play by the government, I know, what an oxymoron...but think about it. These large investors are buying the bulk of this initial issue up, they hold a large portion of it and that drives demand for available stock up, and with it the price...Then who steps in and sells their remaining shares? You got it, the Treasury.

Government and the people get their LOAN back, GM becomes a private company again...and crow gets eaten!

 

[rshaw125]

Bloomberg says this morning that the GM stock needs to sell at $43.67 a share just for the taxpayer to break even.

 

[LS2JSTS]

You left out the most important word in the sentence..."average". The treasury neeeds to average 43.67/per share for the sale of the entire 1.5 billion shares to break even...

"The Treasury needs to sell GM’s stock for an average of $43.67 a share, or 51 percent more than the high end of the offering range, to break even, data compiled by Bloomberg show."

http://www.bloomberg.com/news/2010-11-15...-of-lehman.html

Soooo...while you may see reports at the end of the week that the treausry lost money on this IPO, what they really mean is the treasury lost money on paper that may/may not be offset by the sale of further shares at a higher price down the road. An overall sales price average of $43/share is entirely doable, especially when you consider the orders are already in place for $4 over issue price. With an oversubscription rate of 5:1. Thats represents a huge demand for the stock, properly managed the Treaury should come out fine.

 

[mechanicx]

http://www.msnbc.msn.com/id/40212206/ns/business-autos#