GM IPO, the real deal

Discussion in 'Stocks' started by tmarket, Nov 6, 2010.

  1. The other GM IPO thread is just full of off hand remarks and is pretty useless. Here are the facts for the GM IPO and the most important point is that the US government will initially sell around $27, which is about half what is needed to break even for US govt. They hope to make it up with the other two third of stocks when GM stock recovers.

    This doesn't normally happen: The U.S. government doesn't sell shares on the stock market.

    But two weeks from now, when General Motors has its initial public offering, the U.S. government will sell a third of the GM shares it received as part of the bailout of the company.

    There are at least three strange things about the IPO, which is described in a prospectus GM filed with the SEC.

    1. The U.S. government is going to sell at a loss.

    GM expects to sell its stock at around $27 a share, roughly half what the government needs to make a profit. That's partly to get out of the business as fast as possible; the government doesn't want to be in the car business.

    And the government hopes that by selling a third of its stock at a loss, it will encourage people to buy more stock. Strong demand for GM stock could eventually allow the government to sell the rest of its GM shares for a profit.

    2. Having the U.S. government as part owner might be bad for business — that's according to GM. In its prospectus, the company says the government might do all sorts of things for political reasons that don't make business sense.

    For example: Telling the company what kinds of cars to make and where to make them. Or forcing the company to cut the pay of key executives, which could cause them to leave the company.

    3. GM has no confidence in its own financial reports. The company says that "our disclosure controls and procedures and our internal control over financial reporting are currently not effective."

    In other words, GM isn't confident in its ability to understand its own financial condition.

    That could "adversely affect our financial condition and ability to carry out our business plan," the company says.''
  2. sumfuka


    The gov is incredibly stupid in a lot of areas, but when it comes to collecting money they put pimps to shame. If you don't believe me, go to your local IRS office.

    In other words, this 1st statement is 100% false.
  3. It won’t have to pay $45.3 billion in taxes on future profits.

    The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM’s case, the losses stem from years prior to when GM entered bankruptcy.
  4. From what i can make out the Old GM (Motor liquidation corp) losses were transferred as part of its pre-packaged bankruptcy under special terms of TARP so the govt could unload its position.

    Call it self dealing or whatever you want but this new GM issue should be looked at as though its a treasury issue. They announced a 3/1 pre-ipo split so take that into account when you try to determine if the Govt is really selling at a loss (Really $81 / share).
  5. Historically the market should do well the next couple months.

    Analysts have a value up to $134.

    We have the Fed, who wants to have this offering succeed.

    Barrons is out with a high end of $30.

    You think this thing is going to open at 30 and tank to 10 in a few days? I doubt it. The IB will probably sell this to foreign investors a week later at some 45 or head fake price to lock in a bottom.
  6. Redneck


  7. GM said about $2 billion of the annual profit would come from gains generated by its pension fund, not from auto operations, according to people who attended the event.

    In the past, when GM was losing money, it was unable to claim pension-fund gains as income, but is now able to do so, according to people familiar with the situation. The change is related to the "fresh start" accounting rules that were applied to GM's balance sheet after bankruptcy reorganization.

    The fresh-start rules also mean that GM could have greater charges to earnings for depreciation and amortization.


    FRESH START ACCOUNTING, upon emergence from bankruptcy, the consolidated financial statements of the "Successor Company" apply the provisions of fresh start accounting in accordance with Generally Accepted Accounting Principles (GAAP). Under fresh start accounting, a new reporting entity, the 'Successor Company', is deemed to be created, and the recorded amounts of assets and liabilities are adjusted to reflect their fair value. As a result, the reported historical financial statements of the 'Predecessor Company' generally are not comparable to those of the "Successor Company".
  8. Anyone hear how the public is supposed to get a piece of this gold?
  9. I was wondering the same thing myself, so I e mailed Obama at the White House and he replied.

    " We've recieved a message your airbag has deployed and you're missing a wheel."
    #10     Nov 8, 2010