Bailout Watch 572: Government Fast-Tracking GM IPO, Taxpayer Screwing Confirmed

Edward Niedermeyer
by Edward Niedermeyer
bailout watch 572 government fast tracking gm ipo taxpayer screwing confirmed

Ron Bloom, the defacto head of the government’s auto restructuring task force (or what’s left of it), tells Reuters that the government wants to hurry up a GM IPO in order to get out of the “investment” as soon as possible. And as we’ve predicted, this means taxpayers will be getting the fuzzy end of the lollypop.

Private markets would like to see us exit this investment, and I think they will be more comfortable if we’re on a sustained path out the door than if they think we’re going to try to market time it to maximize return.

And really, why would taxpayers expect any kind of a return from $50b dumped into one of the most prolific wealth destruction machines in recent economic history? So when will this IPO/giveaway take place?

I would anticipate that if the fresh start (accounting) is complete, if you put numbers on the board, if things are going well and the capital markets are open, that in some point in the fourth quarter the markets will be open enough to do a successful IPO… Fritz has talked about back half of 2010 as a potential timing. Whether or not we feel we have enough visibility by June to have that conversation, I don’t know… Clearly we’re going to be smarter in June than we are today. Whether we feel we have enough visibility on the IPO or not, I don’t know.

Just to recap, the company’s CEO is saying Q2 2010, the government overseer (who essentially controls “our” 60 percent stake in the company) says Q4 2010 and the chairman of the board is saying it’s too soon to even think about an IPO. Not that the dissonance matters especially… Bloom is going to be the one who pulls the trigger on any IPO. Besides, Bloom agrees with Whitacre in as much as “Ed said that he thought the company ought to be focused on making money and paying us back and not particularly on the IPO. The IPO is a consequence, not a cause.”

But if Bloom knows what GM management should be focused on, does he know that his responsibility is seeing that taxpayers get something out of an IPO? Bloom mentions a forecast by Deutsche Bank’s Rod Lache estimating that GM could be worth $42b based in part on the value of bonds cashed in for equity during bankruptcy. In that scenario, taxpayers would get about $25b out of the $30b of bailout debt it converted to equity in bankruptcy. But, according to Bloom:

Nobody believes that’s the truth because it’s not there until you can sell it and we’re a long way from selling it. But if you want to just observe it, that’s the observed truth by a smart Wall Street analyst… Our benchmark of success is zero. We don’t think it’s proper over the long term for the government to own an industrial company. If you want to be out, you should be out.

And yet, Bloom doesn’t see the government being able to cash out its entire position with GM’s first IPO. Rather, his goal is to see the government stake shrink to a minority position. So taxpayers are staring down a short-term haircut and no long-term disentanglement. Are these guys for real?

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  • Porschespeed Porschespeed on Nov 18, 2009
    I, and the rest of the “investment class” will be shorting the snot out of this puppy about 6 weeks after the IPO. This will be trading in the $0.50 cent range within 2 years of the IPO. Methinks you are wildly optimistic believing that GM will even be a going concern 2 years post IPO. (But I bet you know that.) I do agree it may still be trading post BKII- among the same group of cretins true believers who are still trading shares of the oldGM. 100% correct that anyone who can understand a P&L will be shorting the IPO.
  • GS650G GS650G on Nov 18, 2009

    The new GM, the ultimate penny stock. It's not a car company, it's a government agency.

  • Dusterdude @SCE to AUX , agree CEO pay would equate to a nominal amount if split amongst all UAW members . My point was optics are bad , both total compensation and % increases . IE for example if Mary Barra was paid $10 million including merit bonuses , is that really underpaid ?
  • ToolGuy "At risk of oversimplification, a heat pump takes ambient air, compresses it, and then uses the condenser’s heat to warm up the air it just grabbed from outside."• This description seems fairly dramatically wrong to me.
  • SCE to AUX The UAW may win the battle, but it will lose the war.The mfrs will never agree to job protections, and production outsourcing will match any pay increases won by the union.With most US market cars not produced by Detroit, how many people really care about this strike?
  • El scotto My iPhone gets too hot while using the wireless charging in my BMW. One more line on why someone is a dumbazz list?
  • Buickman yeah, get Ron Fellows each time I get a Vette. screw Caddy.