Instant View: GM files for landmark IPO

NEW YORK (BestGrowthStock) – General Motors Co filed for an initial public offering of stock on Wednesday that could raise up to $20 billion, clearing a key hurdle toward paying back U.S. taxpayers for a controversial bailout just over a year after its bankruptcy.

Trading in GM shares is expected to start sometime between late October and the November 25 Thanksgiving holiday.

ANALYSTS’ COMMENTS:

LOGAN ROBINSON, UNIVERSITY OF DETROIT MERCY SCHOOL OF LAW

“I think it’s way premature. GM had two quarters of decent results but it’s based on interest-free government equity and new shareholders will want something in return in terms of dividend and more.

“I think it’s really driven by the November elections and not in the best interests of taxpayers.

“GM just changed their CEO, and this is the fourth CEO in just a year and a half. He’s new to auto industry and relatively unknown and the rest of his management team is new.

“I wish GM well but it’s premature for them to go public until we see more quarters of decent results and some stability in the management.”

JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK

“It sounds to me like a large part of it will go to repay the government and that only the proceeds of the preferred shares go to the company. But there’s still going to be an overhang of ownership, and that’s really looming over and will be looming over this company’s head for some time.

“Depending on how the preferred shares are priced, there could be a good pricing opportunity depending on what the rating is. My sense is that the government will try to get their ownership down to as little as possible.”

MIRKO MIKELIC, FIXED INCOME PORTFOLIO MANAGER, FIFTH THIRD BANK, GRAND RAPIDS, MICHIGAN

“The surprise thing was the change in leadership — that was a wrench in the works there.

“I thought it may have behooved them to wait a little bit. A few more quarters of these solid results might have helped them out. The timing part is difficult. What if there is a double-dip recession? It is difficult to gauge the best time to come out.

“I have to give them credit for restructuring, but it will come down in terms of economic headwinds — that will be the biggest issue.”

SEAN EGAN, MANAGING DIRECTOR, EGAN-JONES RATINGS CO, HAVERFORD, PENNSYLVANIA

“It’s a major milestone for the company. Under (outgoing CEO) Ed Whitacre the company has made fantastic progress on almost every front — cutting costs, improving models that are offered, improving the culture.

“The company has a significantly better chance of competing going forward. It also didn’t hurt that they were able to offload the bulk of their debt in bankruptcy. Even if they had that debt, under the new management team there’s no question the company is in much better shape.”

DAVID MENLOW, PRESIDENT, IPOFINANCIAL.COM

“I’m glad it’s out because the hype surrounding when it was coming out and the fact ‘Oh they didn’t file today, maybe it’s a problem’ really pressed too much on the anxiety button for investors.

“Now comes the difficult part, assessing what the valuation of GM truly is.

“It’s a deal that seems to be very reasonable at this point based on what they’re showing for the fees that they paid.”

DENNIS VIRAG, PRESIDENT, AUTOMOTIVE CONSULTING GROUP

“What they need to do is to continue to show they’re making progress on an operational basis. This is a very early step in the company going public.

“The uncertainty is the future market conditions. We’re looking at a second half that is potentially weaker than the first half. That could certainly hurt the sale of the shares. With the change in management, we really need to see what changes, if any, will take place under (incoming CEO Dan) Akerson’s control.

“From an operating standpoint, General Motors needs to show continued progress in terms of sales and profitability. They have turned the corner in the first half of this year, but that’s based upon a major restructuring within the company and a pickup in sales in the first half with no guarantee that’s going to happen in the second half also.”

HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON ADVISORS LLC, ALBANY, NEW YORK

“It’s a very good thing. It’s a particularly good thing for a variety of reasons, not the least of which is that the company is returning to the public marketplace where it can raise capital. Secondly, that it is once again headed in the direction of becoming a publicly traded company. Thirdly, the taxpayer is going to be paid back, which once again adds to the numbers that say the TARP program was a success.

“It is very positive that General Motors is returning to the public marketplace and taxpayers are being paid back.”

JOSEF SCHUSTER, FOUNDER OF IPO RESEARCH HOUSE IPOX SCHUSTER LLC, CHICAGO

“They’re using the preferred shares…to pay some dividends and probably lock up some key shareholders. They will obviously try to get some key investors in now, like some wealth funds from the Middle East. That will be the first strategy, and then they will basically do more formal marketing for the offering to more institutions and retail (investors).”

“It’s all in now, so by November it’s going to happen.”

SCOTT SWEET, SENIOR MANAGING PARTNER, IPO BOUTIQUE

“GM has two glaring weaknesses right now. Yes, it had two consecutive very good quarters, the best since 2004. But yet, even though the numbers are showing profit, they still have problems and their problems are large.

“One of them specifically is in Europe. They missed the chance to sell Opel. As a result, they’re losing several hundred million dollars. It’s an ongoing problem and it’s an albatross right now. They’re likely only going to be able to get dimes on the dollar for Opel now. They brought in all these new managers and they still couldn’t clean it up.

ARIEL HSIAO, MANAGER, HSBC’S NEW RICH EQUITY FUND

“I can find other attractive names with lower risk for my portfolio.

“The U.S. market is recovering, but the growth is slow.”

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO

“From the market sentiment point of view it will be very important because of its size as well as the fact that it’s the first major issue in an industry that’s been in trouble. It could be quite important for the market sentiment in particular.”

REBECCA LINDLAND, IHS AUTOMOTIVE ANALYST

“It’s certainly another step in GM’s recovery, and it’s a significant step because it starts to reduce the government’s equity position in the company and that is the desired end result.

“Any IPO has risks to it and this economy is not recovering very quickly, so to wait for outside forces to settle down could take a long time. You can evaluate any time and establish pros and cons.

“The roadblocks are certainly getting investors to look globally at the company and getting the confidence flowing in investors’ minds that this company is truly restructured and a good investment.

“People may have felt a little bit more comfortable if there was another quarter or two of profitability like we’ve seen in the last two quarters. You can really say somebody is fully reformed when they’ve been out of rehab for a longer period of time.

“One thing overall investors aren’t recognizing fully is that these (U.S. auto) companies are making money in a variety of products now and that is not something that used to happen. That kind of diversity really needs to be recognized and rewarded.”

BRAD COULTER, DIRECTOR AT O’KEEFE & ASSOCIATES

“If GM is valued in that $60 billion to $70 billion range, that gets the taxpayer paid back. But the question is, is that achievable for a company that is a year out of bankruptcy, that has just changed CEOs and that faces negotiations with the UAW? I just think that the risk of failure with the IPO is bigger than the risk of being known as Government Motors.

“Personally, I think they should wait and prove out their earnings.

“I’m very positive about GM — they’ve got good products, they’re blowing up the bureaucracy and hopefully Akerson can keep that going. My only question is with the timing of the IPO.”

Instant View: GM files for landmark IPO