Treasury To Block Foreign Investment In GM?
Another day, another story detailing the political nightmare that is the GM IPO. The WSJ [sub] reports that
The U.S. Treasury is concerned about how many overseas investors it should allow to buy big stakes in General Motors Co. through the car maker’s initial public offering this fall, according to people familiar with the matter.
The caution—aimed at minimizing any political fallout from the massive stock sale—could involve limiting or being selective about which non-U.S. investors such as sovereign-wealth funds would be invited to be “cornerstone” investors in the IPO
Expect Treasury to publicize any limitations on foreign investment in GM’s IPO sometime “within the next couple of weeks.” And no matter how the bureaucrats rule, it won’t be great for taxholders. After all, foreign investors (particularly in China) have the motivation and means to invest heavily in GM, which would help boost the IPO price. The downside, of course, is that the taxpayers’ $50b investment wouldn’t have kept the company American-owned. If keeping ownership in the US is the priority, it’s fair to expect a considerably lower IPO valuation. Heads they win, tails we lose. Ain’t the intersection of politics and business grand?
So, let me get this straight: We send our Treasury Secretary and Secretary of State over to China to beg and plead for them to continue to buy lots of US Treasury Bills, Notes, and Bonds, but we don't want them to buy GM stock. Therefore owning $800 bil to $1 trillion of US debt is good but buying $10 billion of GM stock is inherently evil. I think I will go lie down until my head stops hurting.
They are talking about invited cornerstone investors - not all investors. I would wait to be offended until its actually clear what if anything they actually plan to do. This seems more like idea floating, making conservatives commit to publicly accepting the possibility of foreign ownership so they will not be able to attack the IPO should that occur.
The treasury can't block sales of shares, what it can do though is control the number of its shares it wants to sale and to whom (and since it owns 65% it can effectively choose one majority owner over another, nothing illegal about that.) I think what they want (and despite the well deserved hate of GM), this isn't the same company and they could end up turning into a monster (I mean they are well positioned financially) and perhaps it would be best if US mutual funds, 401ks, etc. ended up benefiting from that, those are the large buyers (banks can't invest in stock (atleast the retail portion)).
If GM's IPO is limited to certain investors and those shares are 'tagged' as to how they can be resold later on, the govt could be effectively controlling GM well past the time it becomes supposedly independent.