GM asks investors to have faith on upcoming stock

Have faith that another bankruptcy will occur or have faith that GM knows what it is doing? P.T. Barnum talk.
GM asks investors to have faith on upcoming stock
http://tinyurl.com/28jtpkv
General Motors has taken a step of faith.
The automaker has declared its intentions to go public in the midst of an economy thats ho-hum at best. Its asking would-be investors, some of whom were burned in GMs bankruptcy, to look beyond that.
Its also asking them to bet that a new CEO with telecommunications credentials, Dan Akerson, can run the worlds second-largest automaker. And while GM is likely to have one of the largest initial public offerings in U.S. history, it will likely issue only 20% of its equity.
That leaves lots of stock left to sell later and lots of questions about what price GMs shares would be able to fetch come November.
The valuation of the stock is not going to be what it would have been had the economic environment been better, said consultant Maryann Keller, a former Wall Street analyst. If this were a company with no previous history and you can dazzle someone with technology, you can sell someone on the possibility of enormous success. But this is a company that has a 100-year history.
Just last year, that history almost came to an end. Still, members of the investment community say enough investors are excited to give the IPO a decent chance of success. Concerns may limit price of GM's shares
Dennis Buchholtz had $98,000 of his retirement funds in General Motors bonds.
Then, GM went bankrupt, and the bonds became practically worthless.
Bondholders collectively took a 10% stake in GM in exchange for erasing the company's debt in its bankruptcy last year.
Once GM goes public, likely late this year, bondholders will be able to sell GM stock to make up a tiny portion of the cash.
"Our $98,000 may end up being worth $3 or $4," said Buchholtz of Warren. He points to the 17.5% stake the UAW's health care trust got in GM and says the Obama administration brokered a better deal for the union.
But if Buchholtz had more money to invest, he says he might give GM another chance. And members of the financial community agree, saying GM's past likely won't hurt investors' appetite for the reborn company, which has posted two straight quarterly profits after 10 quarters of losses.
"I think most people will start from scratch and look at it on the merits," said Mirko Mikelic, senior portfolio manager with Fifth Third Asset Management in Grand Rapids.
Still, Mikelic said he was unsettled by GM's appointment last week of board member Dan Akerson as CEO in place of Ed Whitacre, effective Sept. 1. "Is it going to change again in another few months?" Mikelic asked.
Maryann Keller, a longtime Wall Street analyst who now runs the consultancy firm Maryann Keller and Associates, had been vocal in the lack of confidence she had in pre-bankruptcy GM's directors. The abrupt CEO change, which the board decided on days before GM registered for its initial public offering, makes her doubt the new board again, she said. "Investors want to know who's going to run the company, and you figure it out the week before you issue the registration? That's bizarre," Keller said.
GM will find buyers for its stock -- that much is certain.
But investors' doubts in the company might affect their willingness to pay a high price.
So far, uncertainty over the CEO change isn't hurting GM's price prospects, a person familiar with GM's offering said.
"I'm not hearing, 'You've got to put in the Akerson discount,' " the person said.
Bigger problems for investors are the size of GM's offering and the company's need to release more stock over the coming years so the U.S. Treasury and other shareholders can cash out, the person said.
"If the amount ends up being $15 billion, that's a lot of stock to place" in a slow economy, the person said. "You're going to buy this thing, and there's going to be 80% more that's coming. At the same time, I talk to people who are just foaming at the mouth to get their hands on the preferred (stock)."
Perhaps most concerning, the economic recovery that looked promising now appears to be slowing. Keller forecasts auto sales that stay flat for the rest of the year, below analysts' forecasts early in 2010.
"There is, I think, the potential that this could be embarrassing in terms of valuation of stock," she said. "It's not like someone is going to put a premium price on GM, which builds the most discretionary of products: a car."
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gm is the same people that it was before; just a few heads who don't build or engineer cars, who are just figureheads on a mantlepiece called "change". gm is not going to bust twice so quickly, but it can die a long slow painful death
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On 8/23/2010 1:15 PM, Jim_Higgins wrote:

There was a contest once. A monkey, 2 professional investors and some school kids. The monkey was second and one 12 year old kid smoked them all. When asked how he did it he responded, "Stocks that go down tend to keep going down, stocks that go up tend to go up so I bought stocks that went up for more than 3 months."
You can't make a turkey fly, first or second try isn't going to mater. A turkey can't fly any more than pigs do.
Faith, that is for the Lord, my money does not seek faith, it seeks gains and profits, a return for my risking my hard earned savings. With GM risk so high, and probable returns so low, let the CAW/UAW and CEO's invest their own moneys.
Is the CEO going to loose his shirt if GM bellies up? Nope, he will get a bonus for doing it. If the CEO has 50% of his net worth, or $5 million into it by contract, I might consider it. Otherwise GM is trolling for suckers.
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