Free Markets, Free People

Government Motors files for IPO

And, as you might imagine, it’s all politically driven:

G.M. said that it would offer both common stock and preferred stock in the offering, which could begin as early as October, when the Obama administration will be seeking to portray its aid to the auto industry as a success before midterm elections in November.

How neat and nice. Claiming a profit from the "turnaround", something which has been debunked since, GM hopes to free itself from being called "Government Motors", which, it says is hurting sales. Additionally GM is still hemorrhaging money with a negative cash flow in the millions per month.

Given all of that though, I loved this:

The Treasury is expected to sell enough stock in the initial offering to bring its overall ownership position in G.M. below 50 percent — freeing the automaker of the stigma of being called “Government Motors,” which executives have said is hurting its reputation in the marketplace. G.M.’s 734-page filing said taxpayers would “continue to own a substantial interest in us following this offering.”

Got that?  Treasury is going to sell enough stock to bring its overall ownership position in GM below 50% – however:

The Treasury, in a statement on Wednesday, said it would “retain the right, at all times, to decide whether and at what level to participate in the offering.”

And:

The statement said the offering would not include the government’s preferred G.M. shares, worth $2.1 billion.

Read that however you wish to read it, but that says BS to the first part of the claim where I come from.  The way I read it is Treasury has assumed “the right” to interfere (by buying more stock, not just selling it) at any time it deems it necessary to do so.

So – given the way the last group of investors was treated when GM went into bankruptcy and the fact that government “retains the right” to interfere – why in the world would I want to invest my money in Government Motors?

~McQ

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20 Responses to Government Motors files for IPO

  • After the “Madman theory of the presidency” experience with Chrysler, I can’t believe that anybody would be so stupid as to buy this stuff.  Even now they can’t get anybody to buy MBS (Mortgage Backed Securities), so who, in their right mind, would venture into the GM IPO.

  • Neo, EXCELLENT point.  Obama has gutted the concepts of contract, property, debt, and even bankruptcy.  He’s turned this nation into a Banana Republic in short order.
    Not only would I not buy GM debt or ownership instruments, I won’t buy one of their cars.  I am inclined to not even buy a used GM product, and for the simple reason that I have doubts about parts availability and quality.
    I doubt it will ever happen, but GM will not see any of my custom until NONE of its stock is owned by Big Brother.

    • That is the major point.  The government basically stole GM from the bondholders and gave it to the UAW.  There is no reason to believe this crew would not do so again.  Consequently, there is no reason for anyone to put an money into a new GM.  It will be interesting to see how many people actually forget about the past and bet on the come.

      • Unlike Chrysler, most of GM’s bondholders were not secured.  They earned an unusually high rate of return for their bonds partly because of that fact.  That rate of return infact was the financial burden GM couldn’t survive, regardless of how they got there.

        The theft, if anything, was from the previous stockholders. 

        • Not that UAW deserved a share, but in the given circumstances I believe ownership would favor the entity supplying the DIP financing which was the gov’t and not the unsecured bondholders. 

  • There’s been a whole lot of privatization in the former Warsaw Pact/USSR. I kind of like their approach. Instead of selling shares in an IPO, we should give the shares to the very public that funded the bail out. One of the things that has always bothered me is government benefits from its poor decisions. Who gained from the tobacco master settlement? Not the smokers who were allegedly misled. Not the taxpayers who funded the alleged huge costs of providing health care through Medicaid. No, it was the very state governments who had already collected hundreds of billions of dollars in excise and sales taxes.
    I say have a lottery drawing from the list of every person who filed a 1040 in 2009. Give 100,000 people warrants to purchase the new GM shares. Government should not benefit from its poor decision.

    • A smaller version of this happened back when Spitzer was NY AG.
      Spitzer sues Wall Street.  NY gets the settlement.  The stock/bond-holders get the shaft.

  • You know what would show good faith?
     
    Returning all that money, good faith investors like me, lost in Government Motors when they had the opportunity to declare bankruptcy but instead chose the taxpayer’s flesh.
     
    I don’t trust the commie b@stards as far as I can throw them. They’ll never voluntarily see another dime of my money except that which they continue to steal from me via Government fiat.

  • They’ll never voluntarily see another dime of my money except that which they continue to steal from me via Government fiat.

    OMG…!!!  They got Fiat, too!!!
    On a more sane note…  CF, they are doing it now, today.  There is a push to bail out the union pension funds from the Treasury.  The “Princes of labor” have their sugar-tit, and they are not letting go.

  • Time to check the rules on IPOs, and see what sort of statements about the recovery violate SEC rules…

  • Perhaps they should just equally distribute the government held shares of GM to all US citizens.
    Give everybody a reason to care about Wall Street.

  • The statement said the offering would not include the government’s preferred G.M. shares, worth $2.1 billion.

    Read that however you wish to read it, but that says BS to the first part of the claim where I come from.  The way I read it is Treasury has assumed “the right” to interfere (by buying more stock, not just selling it) at any time it deems it necessary to do so.

    The statement refers to the Treasuring setting its own pace as to how quickly to sell especially the more premium stock.  The Government’s share is worth more if GM can shake the ‘government motors’ slam to a degree or so goes the thinking.  So the less the government owns, the more what it owns is worth.  Much of wallstreet believes it and the govenrment believes it.  But if you want to extrapolate that into meaning something the Treasure could theoretically do (buy stock) to any company at any time, you’re free to do so.  

  • The one plus about the gov’t owning a piece of GM is that when the rediculous CAFE standards start coming into effect, the government might relent instead of forcing the public to dramatically downsize their rides. 

  • McQ[G]iven the way the last group of investors was treated when GM went into bankruptcy and the fact that government “retains the right” to interfere – why in the world would I want to invest my money in Government Motors?

    This is the cost of “social justice”: when laws and principles are scuttled willy-nilly to be “fair” to this “oppressed” group or make some other group “pay their fair share”, it costs the overall society by making normal business that much riskier.  Investment of any sort carries with it an inherent risk; the role of government is to reduce that risk by upholding the rule of law by enforcing contracts, not abrogating them to suit political purposes accompanied by high-sounding rhetoric.

  • Yeah. Right. I want some of That poison.
     
    I hear Fidel Castro & Kim Jung Ill want to go public too. Ironically they have better potential for growth than Government Motors.

  • Come on!  Doesn’t every investor want a piece of the Chevy Dolt?  What fool could pass on that?   Forget about that BMW335i.  For a mere $41K you can buy a pissant vehicle that has a range of 40 miles.  My guess is that it does 0 to 60 in less than a minute.  Chicks will dig you for buying this hot ride.