Saturday, November 20, 2010

Would You Buy Shares in GM?

General Motors (or is that  Government Motors?) released it's shiny new IPO this week, and although it generated a it of buzz from talking heads, the reception from investors seems to be tepid at best:

Besides the performance of the stock offering, there are some serious long term questions about the company itself. For example, consider this article from the WSJ:

The U.S. poured a total of $49.5 billion into GM last year to usher the Detroit auto maker through bankruptcy reorganization. The government has since recouped about $9.5 billion of that money as GM repaid loans, made interest payments and repurchased preferred stock from Treasury.
The article also states that the government would need to sell it's remaining stake in GM at a price of $51 per share just to break even. That's not a ringing endorsement of the supposed turnaround that GM has undergone. Speaking of which, what exactly has GM done to have turned the corner and become profitable?

So, would you invest in GM or are you waiting to see some substantial change in the company before you'd put your money at risk?

Personally, I think the only thing GM has done is play the bailout game exceptionally well, and is now trying to parlay that into a comeback. But it is largely a comeback made of smoke and mirrors.

What say you?


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