Now that the midterm elections are over and the red tide has swept the country, we can turn to matters of real importance, like GM’s IPO. If you’re happy with the election results, the GM stock sale will probably get you angry all over again.
The company has set a target price of $26 to $29 per share, offering 365 million shares to reduce the U.S. Treasury’s holdings from 61 percent of the company to about 40 percent and raise up to $10.6 billion. (Others predict $12-16 billion.) The rescue of GM cost taxpayers around $50 billion.
Unless the stock price zooms, the government will take an initial loss (roughly $4-5 billion) in order to protect the price of the offering, which indeed is at somewhat of a discount. This may lead to a jump in price when trading begins on November 18, said one analyst.
GM’s figures look good, as revenue in the second quarter increased 44 percent over the previous year’s quarter. CEO Akerson has made repayment of the company’s debt to taxpayers a priority.
But none of this matters to those who are still fulminating over the bailout. They do not buy the arguments that the government will likely end up making money (in later stock sales) on the “loan” or that saving an industry and more than 1 million jobs was worth it.
Nor will they accept the fact that the Obama administration was tough enough to force the changes that have made GM profitable again in so short a time—and given Chrysler a good chance of becoming so. If these companies had gone down the tubes, would Ford (which is now doing so well) have survived?
One thing that has given the naysayers good ammunition is the big tax break (up to $45 billion) GM is getting. The government essentially passed on collecting taxes from companies under the Troubled Asset Relief Program (TARP). This was done to make the companies “more attractive to investors.” And, of course, there would be no tax payments if these companies failed.
In doing that, the government seems to have ignored or set aside the presumption of fairness. And, according to some, special treatment for special interests has seemed to prevail in the Obama administration, even if these actions made economic sense.
I suppose that’s part of what brought about the red tide.
Are you interested in purchasing GM stock?