Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GM’s $10.6 Billion IPO Could be an Enticing Opportunity For Investors

Companies / US Auto's Nov 03, 2010 - 06:47 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDon Miller writes: General Motors in an initial public offering (IPO) this month will price its shares at a level that could regenerate investor interest, and even throw off generous returns over time.

At least that's the hope of the U.S. government, which is likely to see its taxpayer-owned stake fall to less than the symbolically important 50% level when it sells approximately $7 billion of its shares in the IPO.


GM, 61% owned by the U.S. Treasury Department, will offer 365 million shares at $26 to $29 each, people familiar with the matter told The Wall Street Journal. The automaker also will offer $2 billion to $3 billion of preferred shares that later will become common stock, the people said.

Projections by GM say the company could have a stock-market value of $50 billion at the start of trading - about the same as Ford Motor Co (NYSE: F), which last week reported net profits of $1.69 billion for the third quarter.

GM will issue its stock to the public in an effort to pay back the $49.5 billion of taxpayer funds it received last year. The IPO would raise about $10.6 billion.

The Treasury intends to sell its remaining shares at higher prices down the road, settling for less than the $12 billion to $16 billion Detroit-based GM and its investment banks had projected earlier. The actual price of the stock to be sold in the IPO would be set about Nov. 17, and the sale would take place the following day.

But for the U.S. government to break even by selling of the rest of its stake, the share price would need to rise more than 60% from its initial level, to about $50.

"This makes sense," George Magliano, a senior economist for IHS Automotive (NYSE: IHS) who is based in New York, told Bloomberg News in an interview yesterday (Tuesday). "They need to protect the price of the offering. The IPO was never intended to buy out all of the government and union stakes in one fell swoop. It's got to be done over time, and you need to get the right price."

The plan calls for the Treasury to offload $7 billion of its shares, slicing its 61% stake to about 35% - lower than many observers expected. The United Auto Workers trust, which pays for retiree health care, would sell $2 billion of its shares, while Canada and Ontario would sell around $1 billion of their shares, The Journal reported.

The plan also includes a stock split that will triple the number of available GM common shares to 1.5 billion. Outstanding warrants will bring total shares available to roughly 1.8 billion.

GM Chief Executive Officer Dan Akerson, a former Carlyle Group managing director, said he intends to reenergize the company by improving quality and streamlining lines of communication at the world's second-largest automaker. Akerson took over for Ed Whitacre as CEO in September and will succeed him as chairman at the end of the year.

"I don't think any investor group has infinite patience, and I'm sure that the taxpayers of America would like to see a return on their investment," Akerson told reporters on Sept. 16. "That's one of the goals that we have."

GM recorded net income of $1.54 billion for the second-quarter on Aug. 12 and chalked up a profit of $1.07 billion in the first three months of the year. Revenue in the second quarter increased 44% from a year earlier to $33.2 billion

GM returned $2.1 billion to the U.S. Treasury last week, bringing the total amount it has repaid through loan payments, interest payments and dividends to $9.5 billion, the Treasury said.

The offering comes after the Standard & Poor's 500 Index climbed 13% in September and October, the best performance for those two months since 1998, according to data compiled by Bloomberg. A total of 21 companies sold shares through IPOs on U.S. exchanges last month, the most since 22 IPOs in December 2007, Bloomberg reported.

GM is set to launch a "road show" to pitch the IPO to prospective investors today (Wednesday), the day after it files the details of the stock offering with the Securities and Exchange Commission

"The market is right and they're going to merchandise this globally," Joe Phillippi, principal of AutoTrends Inc., a consulting firm in Short Hills, New Jersey told Bloomberg. "I think they have a good shot of getting this done."

Investment bankers for GM met with sovereign wealth funds and private investors in the Middle East and Asia last month to gauge interest in the offering, two people familiar with the meetings told Bloomberg. As many as five of the funds are likely to purchase as much as $2 billion of stock in the offering, one of the people said.

At least one prominent analyst believes the GM IPO offers good value for small investors as well.

"This GM deal is going to excite a lot of people and maybe even entice them back to the casino," Jim Cramer wrote in yesterday's issue of the The Street.

"That's right, I believe the deal is going to be a smashing success. It is not just pricing that matters, although I believe the government is going to throw it to the good guys, meaning the buyers. There's also actually a strong investment case out of China," Cramer wrote, referring to GM's growing share of the world' largest auto market.

Source : http://moneymorning.com/2010/11/02/...

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in