GM's value higher than Ford's

Mikey take note
GM's value higher than Ford's http://tinyurl.com/y3rjfcz
General Motors is worth more than Ford.
Say what?
Isn't Ford the hot automaker on a roll, gaining sales, posting profits,
riding the goodwill of a nation for avoiding federal life support and sporting a stock price that's tripled in the past year?
And isn't GM the much-derided Government Motors, 61% owned by Uncle Sam, shrunken from eight to four brands in a bankruptcy that wiped out the Old GM shareholders, and still losing money as of its latest financial report a week ago?
True on both counts, but strange as it may sound, GM is worth more than Ford.
Says who?
Says the trading price of Old GM bonds, now called Motors Liquidation bonds, which are trading for three times what they were worth before GM filed for Chapter 11 bankruptcy.
Huh? Why would that be?
Ah, now comes the tricky part, based on funky math that I won't attempt to explain here, except to say it involves partial differential equations and the Black-Scholes formula, which I believe was developed by an alien civilization.
Seriously, here's what's happened at GM, as explained to me by J.P. Morgan credit reports and some big brains from the worlds of private equity and President Barack Obama's auto task force.
The task force pushed GM into bankruptcy last June, wiping out common stockholders and squeezing the holders of $27 billion in GM bond debt into accepting a 10% share of the nebulous value that a future, post-bankruptcy GM might achieve. Bondholders also got warrants to buy more stock in a New GM if its future value exceeds $15 billion, and again if it exceeds $30 billion.
That old bond debt, along with old lawsuits, contracts and other trash, was dumped into Old GM, or Motors Liquidation.
The GM bonds no longer function as traditional interest-earning bonds, but as bets on the future value of an initial public offering of stock in the New GM.
Since GM emerged from bankruptcy, confidence in its survival and possible rebound has grown. Bonds that were trading for a paltry 12 cents on the dollar a year ago rose to around 20 cents in November, and last week traded at about 34 cents.
That trading reflects estimates that GM's total equity value may be somewhere in the range of $50 billion to $66 billion based on its current cash and debt and projections of future profits. By comparison, the total market value of Ford stock was $45.4 billion, based on Friday's closing price of $13.43 a share.
Plenty of ifs
So, because GM has more cash than Ford (Thanks, taxpayers!) and less debt than Ford because of bankruptcy, GM is worth more than Ford? Yes. Well, maybe:
If GM can post operating profits of $8 billion this year, as Ford is expected to do.
If GM can deliver a couple of clean quarters of coherent financial reports, without special charges or bankruptcy-related legal and retiree costs, to build investor confidence before an IPO.
If Wall Street stays enthusiastic about stocks and IPOs.
And if the overhang of Uncle Sam's desire to sell its 61% ownership stake doesn't unduly depress GM's future stock price.
Those are a lot of ifs, of course. So taxpayers, who have pumped about $150 into GM for every man, woman and child in the USA, should not be spending their refund checks for the rescue just yet.
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Well, not worth more, but has more paper, maybe. I think that GM may actually be making a decent product now....at least, in some cases.
I hope that they can come back and really prove themselves, make something good, do business honestly, and rise like a phoenix.
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On 18/04/2010 6:48 PM, hls wrote:

Bet if Ford got a $170 billion they to would would plow GM into the ground.
GM had $177 billion of debt on their Dec 2008 books. Add in the losses into 2009, likely topped $200 billion. Taxpayers, bond holders, preferred share holder, share holders and suppliers all took the bath for GM negligence and incompetance.
If GM isn't in better shap with owing a mere $12 billion to the Canadian and US governments, their offical debt, then WTF.
Give me $170 billion and I could make more money than GM.
But unfortunately Obam bails out losers and inept at the price of success. Ford would be more popular today if GM went under. So would Toyota, Honda, Nissan, BMW and perhaps even Chrysler. But that is the price of dirty marxist/socialist corrupt business.
So remember when you pay taxes, you are supporting UAW and GM. And the have a lobby group to make sure politicians get their cut. At your expense of course.
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On 18/04/2010 5:49 PM, Jim_Higgins wrote:

Says me. Basically GM unloaded over $170 billion of debt by stiffing taxpayers, bond holders, preferred shareholders and various suppliers.
Sort of like having a 500% mortgage on your house wipped out by a stoke of the pen by Obama and congress. Of which well over $50 billing gets shifted to Amercian and Canadian tax payers. (GMAC, Delco, Chrylser extra).
Now with that kind of blood letting on the taxpayer, if GM isn't worth more something is very, very, very wrong. The registered debt to the taxpayers of the US is less than $7 billion dollars. Yep, only $7 billion.

You know Carlyle Group will love that. Getting all the Lehman holdings for 1 cent on the dollar. Now it is worth billions.

See above, follow the money.
[ snip ]
In a nut shell, the biggest scam in the history of taxpayers has been pulled. It was known 8 years ago or more GM would spin off it's lucrative parts leaving the rotten parts of GM to die or get bailouts. GM was allowed to operate for years in techncial bankruptcy.
Notice how 79% of the people we against in and how little noise congress and senate made on misappropriation of TARP for corrupt auto.
GM might go back on the market, and maybe net $30 billion, but when you add it up, GM has screwed over so many for so much, and not one crook is in jail. Not a one.
So if someone says GM is in a better financial position, they would be right. The best financial position taxpayer debt funded money can buy.
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