GM's IPO DOA?

Cammy Corrigan
by Cammy Corrigan

When GM was taken over by the US and Canadian governments, a lot of money was pumped into GM in order to make it a viable entity. After all, GM didn’t go into bankruptcy because it was a well run company with a tight balance sheet, excellent management and brand, spanking new factories. The more money that got pumped into GM, the more pressure is put on the IPO to generate enough money for this endeavor to break even. And according to the press, it doesn’t look like it’s going to hit its mark.

The Financial Times reports that targets of which the IPO is hoping to hit are getting lower and lower. Because of shaky markets and the lack of confidence in GM managing to extricate itself from the US and Canadian governments, the expected size of the float has gone down from $12b (the figure which GM first stated in its prospectus) to $8b. As the FT reports, “according to those close to the deal, the initial public offering will value it close to $60bn, short of the $70bn that some analysts estimate as the figure GM must fetch overall for the US and Canadian taxpayers in order to break even.” The report also mentions that plans to sell the stock to overseas investors have been cut back because of fears that the first IPO will be disappointing.

In short, this GM IPO has “flop” written all over it. The US government may regret alienating Chinese investors as it seems they were only people with any interest in buying GM stock.

Cammy Corrigan
Cammy Corrigan

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  • NulloModo NulloModo on Oct 04, 2010

    The government was pushing hard for the IPO, but now it's looking like the whole TARP program may actually turn the taxpayers a profit, so there might not be as big of a rush as originally thought.

    • See 4 previous
    • Charly Charly on Oct 05, 2010

      gslippy, the US seems prospers.

  • George B George B on Oct 05, 2010

    I predict that the GM IPO doesn't happen until some time before the 2012 election cycle. If GM had even a small amount of publicly traded stock, their accounting practices would need to improve considerably.

  • Rday Rday on Oct 05, 2010

    The GM and Chrysler bankruptcies were simply payoffs to the UAW for supporting the democrats. In a real bankruptcy everything including wages would have been renegotiated to reflect what the real market for labor would have been. And the UAW had a sweetheart deal that basically gave them what they had before. The bankruptcy was a total sham and didn't address the labor costs that are still bedeviling GM. But when politics overrides business law and good common sense, what else would you expect from our 'wonderful government'. And people still wonder why we are broke as a nation and the economy is a total mess. Look no further than the GM/Chrysler bankruptcies if you want to see our corrupted government at work.

  • John Rosevear John Rosevear on Oct 05, 2010

    Cammy, I think your post misses the point. The IPO price doesn't actually matter much. The US (et al) is only selling a fraction of its shares, and will sell the remainder in chunks over the next few years. It's the AVERAGE per-share selling price, when all is said and done, that is what matters. It's a priority for GM to get the government out of the majority-ownership position for a lot of (mostly internal) reasons that I would have thought TTAC would have caught on to by now. That's what the timing of the IPO is really about, I suspect.

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