{"id":286,"date":"2010-11-17T22:56:53","date_gmt":"2010-11-18T02:56:53","guid":{"rendered":"http:\/\/jparnell.com\/blog\/?p=286"},"modified":"2010-11-17T22:56:53","modified_gmt":"2010-11-18T02:56:53","slug":"the-gm-ipo","status":"publish","type":"post","link":"https:\/\/battle4liberty.com\/?p=286","title":{"rendered":"The GM IPO"},"content":{"rendered":"

The Wall Street Journal<\/em> is reporting today that General Motors in on track to sell about $18 billion in shares in what will likely become the world’s second largest initial public offering (IPO). So why are some investors interested in GM now when nobody would touch the company two years ago? Has GM been nursed back to health?<\/p>\n

Arguments to the contrary notwithstanding, accounts of a GM turnaround are premature at best and vastly overstated at worst. But the company is probably a safe bet, at least for a while. Let me explain.<\/p>\n

I have argued from the beginning that Obama’s massive infusion of government funds into GM was a guarantee that the company will be “profitable.” The ownership position gives the federal government an incentive to make sure this happens, at least as long as Obama is around. A loss for GM\u00a0is a political loss for\u00a0the Democrats. It’s no surprise that\u00a0the massive taxpayer support, cash for clunkers, and the public flogging of Toyota have all benefitted the company as well. Whether it’s R&D incentives for “green cars” or healthcare legislation that relieves the company of obligations to its workers and\/or retirees, the Democrats will continue to funnel taxpayer funds to GM, directly or indirectly. Smart investors know this.<\/p>\n

Investors in the GM IPO include giant pension funds, hedge funds, and GM factory workers and retirees.\u00a0But SIAC, a state owned enterprise and partner of GM in China, also invested, acquiring $500 million in stock or about 1% of the company. SIAC made its intentions known before the IPO. Concerns about Chinese ownership of GM aside, the SIAC investment raised investor confidence because the purchase gives the Chinese government skin the game as well. A GM failure would result in heavy losses for the US and Chinese governments, the UAW, and large pension funds. The combined political pull here is almost too great to imagine.<\/p>\n

In Business School we teach that GM’s long term success should depend on its ability to produce quality vehicles that consumers see as good values, but this is not really the case anymore. Sure, building a decent car is important, but GM’s success is much more political. I don’t know where the stock price will go, but I do know that Washington will do its best to support the company. For this reason, it might not be the worst stock you can buy.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Wall Street Journal is reporting today that General Motors in on track to sell about $18 billion in shares in what will likely become the world’s second largest initial public offering (IPO). So why are some investors interested in GM now when nobody would touch the company two years ago? Has GM been nursed […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/286"}],"collection":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=286"}],"version-history":[{"count":0,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/286\/revisions"}],"wp:attachment":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}