The Revenge Of The GM Bondholders
Want in on GM’s IPO without being a sovereign wealth fund or Goldman Sachs? Join the BDSM lifestyle for fun and (possible) profit. Buy the very much troubled pre-bankruptcy bond, and you could make out like a banshee. Reuters has the surprising news that bonds issued by GM’s bankrupt predecessor are a good investment. “GM’s 8.375 percent bonds due July 2033, which were issued by old General Motors Corp. and convert to shares in the new GM, rose 0.375 cent to 35.875 cents on the dollar at 4:29 p.m. in New York.” The day before, the bonds had jumped 2.25 cents, the biggest gain since June 14.
Why the sudden interest in the converting bond?
Pre-IPO hype.
“As global light-vehicle demand recovers, we expect GM’s earnings to grow considerably, thanks to a dramatically lower cost base than old GM,” said David Whiston, an analyst at Morningstar.
Other analysts think GM (or the Treasury) are giving the stock away. Kirk Ludtke, SVP of CRT Capital Group LLC, opined that the $27.50 midpoint price is about 41 percent below the “fair value” of GM’s shares.
With all the hype surrounding the IPO, holding the dodgy distressed bond could be the better play. Investing involves risk, including possible loss of principal. Consult your investment adviser before making any investment decisions.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I'll stick with Mexican Racehorses.
They should've IPOd back the end of August. The only light I see for GM's stock is that some institutions will be required to buy it as a part of basket funds, etc. Depending on the politics, they may even go on a bender and force it back into the Dow.
No revenge here. Sure you might do well buying GM bonds now; but the original holders had their legal rights violated.