Payback's a Bitch: New GM Stock Must Hit $68 Billion

by Robert Farago

Published: June 30th, 2009

payback s a bitch new gm stock must hit 68 billion

The Washington Post reminds us that Uncle Sam’s chance of recouping taxpayers’ $50 billion “investment” in New GM shares are somewhere between slim and none. To recover the money poured down the GM rathole so far, not including “extraneous” bailouts to lender cum banks, suppliers, dealers and car buyers, the automaker’s stock must rise to the point where it’s worth $68 billion. And remain at the level as the feds attempt to off-load their/our 60 percent share. As we like to say in these parts, good luck with that. Or, as the WaPo puts it, “Even at its recent 2000 peak, GM’s stock was worth only $56 billion.”

Forgetting to add “if ever,” analyst Maryann “Where’s the sense of urgency” Keller puts that into perspective: “I don’t see GM hitting those benchmarks in a very long time.” And here’s the really galling thing: as, previously stated, one the main guys behind/within the Presidential Task Force on Automobiles isn’t mad as hell and will take it some more. On your behalf.

“We have certainly looked at scenarios where, over time, a very substantial portion and potentially all of the taxpayer investment in General Motors will be returned,” Ron Bloom, a senior adviser to the administration’s auto task force, told a Senate committee earlier this month. “But I certainly by no means would say that I am highly confident that that will occur.”

Is Ron trying to say that he’s somewhat confident GM won’t pay back a “substantial portion” of US tax dollars? Normally, when I invest $50 billion in something, I want to know when I might see my money again. You know: plans, timelines, benchmarks, deadlines. Just sayin’.

Anyway, if you’re looking for an analyst sufficiently delusional to believe that New GM’s stock price will soar to previously unattainable heights, triggering a happily-ever-after come-to-Jesus-type moment, look no further than the company’s CEO. Of course.

“Can a company with $100 [billion] to $140 billion of revenue have $70 billion of market cap?” Henderson said in an interview last week at the company’s headquarters. “Yeah.”

Yeah? Well, there’s only possible justification for this bridge loan into bailout into equity mishegos, as performed by rapper 2Big2Fail: the cost of letting GM go under would have been greater than $50 billion (and the rest). As the feds march down the road of nationalization, it’s about time someone other than the ridiculously biased CAR statisticians actually MADE that calculation.

Robert Farago

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2 of 19 comments

PeteMoran on Jul 01, 2009
The bankruptcy should give GM a healthy balance sheet, with more than reasonable levels of long-term, low-cost debt. Balance sheet? Assets as well then. Is "new GM" a Going Concern? No-one else other than the Government is proposing a value above near-zero. I bet my first born, that if GM hit a market cap of $100b it will be inflation adjusted 2030 dollars, and Toyota will be worth $2,000b.

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Pch101 on Jul 01, 2009
Is “new GM” a Going Concern? It should be following a bankruptcy, in that it should have manageable debt and ongoing sources of capital. A going concern does not necessarily equate to it being a great business, but yes, it should certainly qualify as a going concern. No-one else other than the Government is proposing a value above near-zero. The value of the stock out of the gate will obviously be low. The operations would need to improve, of course.

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