The IPO of GM stock is going well:
General Motors Co. shares rose modestly in their first day of trading Thursday after the car maker’s historic initial public offering gave investors their first chance to buy and sell GM stock in more than 18 months.
The shares opened 6% higher as GM Chief Executive Danieal Akerson rang the opening bell on the New York Stock Exchange. In midday trading, the shares were ahead almost 7%.
GM was on pace to sell $18.1 billion in shares in what likely will be the second-largest U.S. initial public offering ever, capping a remarkable two-year turnaround in which the car maker went from begging for a government bailout to posting its first steady profits in more than six years.
However, I’m not really sure for whom:
With Wednesday’s sale, including the overallotment, the Treasury lost roughly $4.5 billion on GM shares it acquired at an effective cost of $43.84 apiece. The Treasury would need to reap $26.4 billion, or an average of $52.79 a share, on its remaining stake to break even.
Unless the government is expecting GM’s stock price to rise to over $52 a share or fall significantly below $33 per share this doesn’t sound like a particularly good deal to me.
Considering the bailout kept over 200,000 people gainfully employed at GM alone, the additional tax revenues that produced, along with avoidance of doling out unemployment benefits for two years, should factor into the bottom line of the deal.
As should the opportunity costs of the approach taken.
I didn’t support bailing out GM to begin with, but the end result is beginning to look better than I expected. We’ll have to see how the company actually performs over the long-term.
My feeling was always that we were going to do a bailout, just because no politician could stomach a bankruptcy on his watch. Even if the polls showed an opposition to bailout, any politician would see the long future of blow-back. “He let GM fail on his watch.”
I don’t think I needed to strongly voice my preferred course (orderly BK, and sale of divisions) just because I didn’t ever think it was a serious possibility.
… and so, given the political and social reality that the bailout was just going to happen … it cost what it cost.
As should the opportunity costs of the approach taken.
Sure. But opportunity cost is a question that should be asked even of successful ventures. Which this may turn out to be. It has certainly been much more successful than I, or most other observers, seemed to think it would be at the time.
To have a literal opportunity cost you have to have a sum of money and choices about how to spend it. We live in funny times, when the government can borrow at close to zero percent interest, and when how much to borrow and for what is a purely political question.
If covering Arizona with solar-thermal power plants would give us cheap energy from now on, why not do it at zero percent interest?
It isn’t really a cost-benefit, or opportunity cost, argument is it?
Such things are argued as questions of political philosophy.
How quickly we forget.
The distribution of the spoils was not what should have been.
The fresh money (taxpayers) got screwed. The other interests, with ZERO to MARGINAL VALUE, at time of restructure are getting ill-gotten spoils.
A travesty.
Shaking my head.
Tell me again about how policy is designed to result in improved outcomes. Forget optimal, lets go with improved. C’mon we are all dying to hear how the bail out was an improvement.
It varies, Steve. But few things have the weight in American iconography that GM does (or did).
There was a time when the company was a symbol and standard bearer for the country. While it is less so in fact (in the information age), many still feel it that way. To them the bankruptcy of GM would have been a body-blow.
jp, the bailout was a body blow to many who got screwed out of their money in the government bailout. Basically the government fucked over bond-holders and preferred stock holders in order to suck up to the UAW – and to pat itself on the back for ‘saving’ GM.
And a lot of those that got screwed weren’t simply the wealthy individuals that Obama and the Democrats seem to hate with their entire being. (Does Obama ever speak about anything without crying about how the Republicans are going to starve all the children in America to “give tax breaks to millionaires and billionaires”?)
GM deserved to fail, it should have gone through the usual bankruptcy process, and the rule of law and the validity of contracts should have been upheld. I still can’t understand how the government was able to completely fuck over several hundred years of contract law like that and get away with it. What’s the opportunity cost for the government acting like a bunch of goddamned gangsters?
But I’m pretty sure that was what Drew was getting at above.
“I don’t think I needed to strongly voice my preferred course (orderly BK, and sale of divisions) just because I didn’t ever think it was a serious possibility.”
… and now how do those same people upset about GM and due process feel about papering over the MERS scandal?
Now how do those same people upset about GM and due process feel about papering over the MERS scandal?
Which part of the scandal? For the most part the whole damned thing stinks, and once again the banks and financial companies are sticking it to the rest of us.
Thanks for that non-response!
I know quite well why GM was bailed out. But right now it looks like it was a bad policy that has most likely made most of us worse off.
My contention is that policy is not about making improvements to various outcomes, especially in the economic sphere. You sneered at this. So I’ll ask again. How does bailing out GM result in an improvement over where we were….say in 2008 or 2009?
Attempt at distraction duly noted.
Distraction?
What’s with you guys. I was with you that orderly BK was the best plan way back at the time. I don’t defend anything else as better. It is just my observation, as social observer, that bailout was inevitable.
Can you not distinguish prescription from observation?
If I observe something, do you think I must defend it?
WTF.
BTW, MERS interests me because I’m not sure my position. If MERS did fraudulent conveyance, that pisses me off, but it might be arguable that papering over those conveyances (making them legal retroactively) might be some sort of lesser evil.
My prescription would probably be to make MERS fix those conveyances, at their own cost, but my observation/expectation might be that we will get some kind of socialization of this problem as well.
John,
It is a distraction, because I was asking you how the GM bailout was an example of policy that lead to an improvement in our economic situation. I’m still waiting for that answer.
By the way you know my position on this. You commented about a dozen times on my OTB post on this. So spare us the bullshit and answer the question, or just come clean and say you can’t. I’ll accept that answer too.
Stick to the topic: GM.
Icepick’s statement of my implicit point is correct.
JP’s commentary reminds me of a public television program I saw years ago where a guy got off on a rape trial. A juror, when asked why he didn’t vote to convict replied: “look, the woman should have just laid back and enjoyed it; there was nothing she could do about it.”
True story.
So because I saw it coming, Steve still calls on me to defend it. Even though I was for the bankruptcy.
Drew draw a pretty embarrassing parallel. I mean embarrassing for him, if he has any sense.
Did I say anything remotely like “enjoy it?”
Of course not.
I can only think that you have no genuine fans of bailouts here, you need to nominate me, in order to have an opponent.
This is a place where you could use a little self-control.
BTW, will you come back and ask me to defend whatever MERS resolution we get, a year from now? Will you work it into a rape story?