President Barack Obama says General Motors' plan to sell stock marks a major milestone not only in the turnaround of that iconic company, but of the U.S. auto industry as a whole.As I warned in early September, the stock offering likely would result in a loss to taxpayers. And it did, as reported by Reuters (emphasis mine):
A slimmed-down GM will begin offering stock Thursday, ending the government's role as majority shareholder.
The U.S. government is satisfied with pricing and the investor lineup in the General Motors Co [GM.UL] (GM.N) public offering, a senior Obama administration official said.
Ron Bloom, the administration's point man on auto restructuring, told Reuters Insider ahead of GM trading on Thursday that the government wants a fair return for taxpayers on its $50 billion investment, but also wants to "get out of this thing as soon as we can." ....
Bloom said GM has done the right thing and pricing of $33 per share is a "fair deal" even though the partial sale represents a loss of roughly $9 billion on taxpayers' original investment.Oh, by the way, GM is not even promising to repay the remaining taxpayer investment, and it is unlikely that future stock sales by the government will be enough. As reported by CNN (emphasis mine):
But even with that stock sale and other money returned to the government by GM, about $27 billion will remain unpaid. Whether taxpayers get that back will depend upon the price the government gets for its remaining 33% stake in the company when it sells shares in the future. The share price will have to rise about 65% in order for taxpayers to break even....
New CEO Dan Akerson said this was the right time for the company to go public again, but stopped short of promising that taxpayers would be paid back with future stock sales.Had GM gone through the normal bankruptcy restructuring process, taxpayers would not have lost a dime and the company would have emerged even stronger than it is today.
In January, then-CEO Ed Whitacre promised that taxpayers would be repaid and might even make money on the bailout.
"I think the government's investment is well placed and I think they'll make a lot of money," Whitacre told CNNMoney on the floor of the annual auto show in Detroit. "It won't be too long."
If this is success, what is failure?
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ReplyDeleteObama: Defining Success So That Any Failure Qualifies.
The Loss is really double that, as I believe the 9 Billion is a realized loss on the shares being sold.
ReplyDeleteGovernment is only selling 1/2 of their stake, meaning they have an unrealized loss of another 9 billion on the stock they still hold. That could shrink if the GM stock does well, but it could grow if GM tanks.
No one talks about ford. Didn’t take any money, did it the American way and is doing fine.
ReplyDeleteAnd, of course, that doesn't even take into account those of us that owned GM stock before the bailout. Our stock is worthless, although on the upside it's not a capital gain. At least if GM had gone through a real bankruptcy I would only have lost once, now I get to pay to bail them out as well. Heckuva job, Obama!
ReplyDelete...and the company would have emerged even stronger than it is today.
ReplyDeleteHow do you know that?
What does everyone think of this statement in the GM IPO prospectus:
ReplyDelete"We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan."
http://online.wsj.com/article/SB10001424052748704648604575620982583079458.html?mod=WSJ_Markets_RightMostPopular
Let's jump off the cliff again and see what happens THIS time.
I was also listening to a discussion today on CNBC that included analysts touting the IPO and one of the explanations offered in defending the very hard to work around financial difficulties was that once GM is on a sustainable path to recovery, the unions will be asked to make more concessions which they will agree to out of gratitude.
ReplyDelete(giggle) Yeah, that'll happen. Get ready for the next bankruptcy.
Didn't the Obama 4-man scramble team exempt GM from $45 billion in taxes, just to make it look like a good IPO? Why yes, Timmy, they did.
ReplyDeletehttp://online.wsj.com/article/SB10001424052748704462704575590642149103202.html
""We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan."
ReplyDeleteThey send Madoff to jail for fraud and allow the government to do this? This is insane.