Heather Horn at The Atlantic with the round-up. Horn:
GM has had a fantastic second quarter, reporting a $1.3 billion profit. That “set[s] the stage,” reports Bill Vlasic for The New York Times, “for the automaker to file for an initial public offering, possibly as soon as Friday.” How well GM stock does, he explains, “will determine how much money American taxpayers will recoup from the $50 billion government bailout of G.M.”
Steve Schaefer at Forbes:
A year ago, General Motors was fresh off a spin in bankruptcy court and an IPO was the light at the end of a very long tunnel. By January the automaker’s executives were laying out the key checkpoints on a journey back to the public markets and now, just over 14 months since filing for Chapter 11 GM is on its way to a public offering that is widely anticipated for the fourth quarter.
Everybody’s got a view on the GM story and on Thursday the IPO specialists at Renaissance Capital offered their own take on how the automaker should go about returning to the public market, offering up a four-point plan for how GM can get out from under the government’s thumb and ensure it is offering a valuable opportunity for IPO investors.
Here are a few highlights from the four-point plan outlined in the Renaissance Capital commentary, which I encourage you to read in its entirety:
Transparency means full and fair disclosure. The Treasury has the duty to ensure that all material fundamental and governance issues are fully disclosed to potential public investors. Thus far, GM has largely avoided specifics on its strategy, but the company now must clearly lay out a chronology for regaining market share, realigning costs and transitioning from government control. Assuming that GM does a $20 billion raise in this upcoming IPO, what’s the plan for the other $30 billion held by the government?
Assure IPO allocation transparency. Prior IPO bad practices included spinning shares to favored executives or giving hot IPOs as “free money” to institutional investors as a quid pro quo for other business.
Decision-making roles must be clarified. GM and the government have been silent on how the competing interests of shareholders, the administration and the United Autoworkers will be resolved.
Value the stock for success. In thinking about valuation, the government and management need to understand that the GM IPO is in a similar position as a debt-laden private equity company with backers eager to monetize an investment. Recent sales of shares by such highly motivated selling shareholders have been accomplished only with deep discounts. Over the last two years, between 50% and 70% of private equity IPOs have been forced to price below the originally proposed ranges. GM needs to adjust its expectations accordingly.
Among the other issues that need addressing according to Renaissance Capital’s roadmap: the post-IPO succession plan for CEO Ed Whitacre; how GM’s product mix will be driven by the administration’s environmental policy and will the Treasury take a backseat to management as it offloads its stake in the automaker over time.
John Ogg at 24/7 Wall Street:
We are expecting somewhere around $15 billion per discussions we have had with others. Here is the big question… Will the GM IPO become a busted IPO right out of the chute like so many others have?
The company recently secured a new $5 billion credit line and when the IPO will actually come, that may be as long as 45 to 60 days after the filing and will be somewhat dependent upon market conditions.
Richard Read at The Car Connection:
The line of credit has been pieced together from ten banks, including big-hitters like Bank of America and Morgan Stanley — two corporations that have shared GM’s pain of bankruptcy and bailout. More may join the ranks, since the line of credit is a potential cash cow for lenders.
But today’s news isn’t just important for GM, it’s also a major development for politicians. GM and the Obama administration both took a lot of heat for last year’s controversial bailout, and the nickname “Government Motors” still hangs around GM’s neck. Filing for an IPO now means that GM’s return to the stock exchange could happen before November’s mid-term elections. That would be a boon for Democrats, who could point to the IPO as evidence that the bailout was successful and that taxpayers will eventually recoup their loan from GM.
But even if the IPO runs on schedule, Republicans will probably still be able to point to government ownership of GM, which currently hovers at 61%. GM wants the Treasury Department to sell off about $10 billion of its $43 billion stake in the company as soon as the IPO launches, which would bring the government’s position below the 50% mark. However, the Treasury isn’t completely onboard with that plan; they’re afraid — as they should be — that selling off that much equity at once would dilute the value of the company and the government’s remaining shares. And right now, “diluting” is the last thing that probably needs to happen for GM.
That said, demand could be high for GM stock when it does relaunch — not least because of the company’s earnings, which are rumored to ring in above the $1 billion mark for the second quarter. We’ll have more about that later, but in the meantime, check John Voelcker’s post about Ed Whitacre’s sudden retirement.
John Neff at Autoblog:
The announcement today that General Motors will soon be welcoming its fourth CEO in just 14 months was startling news, but the real unanswered question is just who is Dan Akerson? We’ve already told you what his business chops are and it’s clear the man can run a lemonade stand, but there’s virtually no other information available out there besides his resume. And as for pics, the entirety of the internet has but one to offer, which is Akerson’s glamor shot as a member of GM’s board of directors. Flattering? No. Looks like a high school principal’s year book picture.
Well, we dug a little and found some interesting info on one Mr. Daniel F. Akerson. For one, he lives in McLean, Virginia and is reportedly an avid golfer. Ok, not too surprising, as most corporate executives can swing a club. How about this: He’s said to be worth an estimated $190 million. Yeah, CEOing is a good gig if you can get it. Also, he currently drives a Cadillac CTS.
Finally, we’re told that Mr. Akerson’s first car was an MGB roadster, which he quickly traded in for a 1970 Oldsmobile Cutlass. Now, we don’t have confirmation on which Cutlass he had, and it makes a difference. The 1970 Cutlass was nothing special, unless you’re talking about the 442, which was a legitimate muscle car. The fact that Akerson first had an MGB makes us hopeful that he is a car guy after all and that the Olds in question was the 442… or at least was powered by a Rocket V8 of some sort.
Derek Thompson at The Atlantic:
The good news is coming from good places. Although the company cut 20,000 jobs and a dozen U.S. plants, the profits aren’t coming all from cost cuts. Revenue grew from $32 billion to $33 billion in the second three months of the year. What’s more, the company is seeing a strong North American market for its goods. While it’s certainly not bad to have a strong overseas market, any indication that the American consumer is actually breathing out there is nice to hear.
There’s lots of silver lining, but the dark cloud for tax payers is that an IPO won’t end the government’s significant stake in the company. As the Michigan Messenger reports, the federal government will reduce its stake in the company from about 60 percent to below 50 percent in the initial IPO, and sell off the rest of the taxpayers’ stake in the company bit by bit.