General Motors

[WuDrWu]

I want to understand what happened to GM, without the political slant, if that is at all possible.

Financially.


If I understand correctly, the shares of GM are now traded on what are referred to pink sheets (I have no idea what these are or why they are different than regular trading).

I thought if a company declared Chapter 7 bankruptcy, then their shares are worthless, at least to the company. But GM declared Chapter 11. Yet, when they have a new IPO (can the same company have another "INITIAL" public offering???) it is my understanding the old stock will be worthless and ignored.

Is that anywhere near correct?

Also, what about the government bailout. Where did that money go, why do they talk about the government getting paid back?

If tax money went to prop up the company, and the people that own the company lost everything (stockholders) and the government profits on the new resale on new stock, something is terribly f'd up about that.

More intelligent folks than I are encouraged to respond, so that should be pretty much everyone.

[Maggie]

I can’t answer all your questions and I am not even sure I am answering any of your questions – but I will give it a shot:

I seem to recall that there was some question about whether GM actually paid back part of its bailout or if it simply transferred dollars from one taxpayer funded TARP account to another. Even so, I am not sure they have paid everything back – they received a lot of money and I didn’t follow up on it. I know that as part of its government-financed bankruptcy, GM has indeed done an admirable job of cutting costs. But it has additional problems, the economic environment going forward for auto sales is poor (Cash for Clunkers was a colossal waste of money) and GM has a declining market share. Also, don’t forget about its pension obligations - which might dampen investors’ appetite when the company’s IPO rolls around. The success of that IPO is crucial to determining whether the bailout of GM can be said to have succeeded (which is a separate question from whether the government was right to bail out the company at all). Much of the taxpayers’ “investment” in GM is held in the form of preferred stock – which means that GM’s capitalization would have to reach X billions of dollars for taxpayers to break even. I would guess that would be a tall order.

The bottom line, I think, is that GM still owes the government a great deal of money, and it is far from clear that they will be able to repay it all. As long as the prospect of large losses for taxpayers loom in the distance, it is impossible to say that the jobs saved didn’t come at the expense of other jobs. Even if all the money is paid back, it is hard to predict what consequences will follow from such an unprecedented bailout. If I recall correctly the automakers did have had a good couple of quarters; if we are lucky, they’ll have a couple more – but I don’t think that is likely. But we are a long way from being able to say that the bailout “worked,” much less that we wouldn’t have been better off letting GM reorganize in bankruptcy without our help.

[NCAABound]

U.S. taxpayers, who bailed out GM last year, would see their ownership stake drop from 61 percent to around 43 percent, not including any extra allotment of shares bankers could offer to satisfy strong demand, the people said.

GM has wanted to shed government control, contending that it hurts the company's sales and public image. The government will get the lion's share of the $10 billion and recoup another chunk of the cost of bailing out the automaker.

GM will not make any money from the sale of the 365 million common shares that make up the IPO. Instead, it will sell roughly $3 billion worth of preferred stock that will convert to common stock in 2013, the people said. Preferred shares pay a set dividend and are considered more like bonds. GM will use the money from the sale of preferred stock to repay loans and make pension payments.

GM is now a private company that's owned by the U.S. government, a United Auto Workers health care trust, the Canadian and Ontario governments and former GM bondholders.

The Canadian governments are expected to cut their stake from 11.7 percent to 9.6 percent, while the UAW retiree health care trust would sell less, cutting its stake from 17.5 percent to 15 percent, two of the people said.

U.S. taxpayers became GM's biggest shareholder when they gave the automaker $50 billion to survive bankruptcy restructuring and emerge as a smaller company with far less debt.

GM has either repaid or has plans to repay a total of $9.5 billion, and the government hopes to recoup its remaining $40 billion investment with the initial stock sale and several follow-up sales.

http://finance.yahoo.com/news/Sources-GM-IPO-expected-to-apf-2397874185.html?x=0&sec=topStories&pos=3&asset=&ccode=

[Maggie]

More news on the IPO:

GM said it intends to sell almost a quarter of its 1.5 billion shares of common stock, at a price between $26 to $29 a share. It also intends to sell 60 million shares of preferred stock with a liquidation value of $50 a share.

That price range would suggest that the Treasury Department's 60.8% stake in the company would be worth between $23.7 billion to $26.5 billion once the stock starts trading. That value would be well below the $40 billion in taxpayer money GM received from the government and has yet to repay.

I don't know - if we are going to get our money back.

GM IPO to raise about $13 billion

[RampageWSU]

What if technically it's a different company? My dad experienced this with a metal building he purchased. The company filed for bankrupcy, then reorganized and literally dropped the "S" off their name. They refuse to honor the 30-year warranties on the previous company.

Shady!

[InWuWeTrust]

the old stock "GM" is pretty much worthless, although could still be traded OTC, previous bond holders may get a little bit once everything is final.

the taxpayers haven't been fully paid back, despite the advertising that gm did about 4or5 months ago to the contrary. the stock offering will reduce the taxpayers stake in the company substantially, but we the people will still be the largest shareholders.

i spoke with a few mutual funds managers with two of the largest fund companies this week and they shared that they had no interest in adding the new stock to their portfolios. these are two funds that most of the local 401k plans have in their lineup.

seems like the same ole company, with a different ticker symbol. it seems like the only way that they will survive long term is to break the union up, and become much more lean than they are now.