GM to IPO

General Motors, a division of the U.S. government, just reported Q2 net income of $1.5 billion. Not too bad. But the big news is that the CEO Ed Whitacre is out and the company is gearing up for an IPO. This will be one of the most anticipated offerings ever.
One old rule of investing is to pay attention whenever a government has a yard sale. You can often pick up cheap bargains. In fact, that’s how Carlos Slim and Silvio Berlusconi made their big bucks.
GM is planning to raise between $12 billion and $16 billion in a public offering. According to reports, the IPO will involve 20% of the company’s shares. Since Uncle Sam currently owns 61%, the IPO would bring the governments total to under 50%.
My only fear is that the current market is a rotten environment for an IPO. Debt is loved and stocks are unloved. That tells me that it’s a better call for GM to issue bonds and buy the Treasury’s shares from them.

Posted by on August 12th, 2010 at 11:33 am


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