August 18, 2010 / 8:14 PM / 7 years ago

Instant View: GM files for landmark IPO

(Reuters) - General Motors Co filed for an initial public offering of stock on Wednesday, clearing a key hurdle toward paying back U.S. taxpayers for a controversial bailout just over a year after its bankruptcy.

Trading in GM shares is expected to start sometime between late October and the November 25 Thanksgiving holiday.

ANALYSTS’ COMMENTS

DENNIS VIRAG, PRESIDENT, AUTOMOTIVE CONSULTING GROUP

”What they need to do is to continue to show they’re making progress on an operational basis. This is a very early step in the company going public.

”The uncertainty is the future market conditions. We’re looking at a second half that is potentially weaker than the first half. That could certainly hurt the sale of the shares. With the change in management, we really need to see what changes, if any, will take place under (incoming CEO Dan) Akerson’s control.

“From an operating standpoint, General Motors needs to show continued progress in terms of sales and profitability. They have turned the corner in the first half of this year, but that’s based upon a major restructuring within the company and a pickup in sales in the first half with no guarantee that’s going to happen in the second half also.”

HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON

ADVISORS LLC, ALBANY, NEW YORK

”It’s a very good thing. It’s a particularly good thing for a variety of reasons, not the least of which is that the company is returning to the public marketplace where it can raise capital. Secondly, that it is once again headed in the direction of becoming a publicly traded company. Thirdly, the taxpayer is going to be paid back, which once again adds to the numbers that say the TARP program was a success.

“It is very positive that General Motors is returning to the public marketplace and taxpayers are being paid back.”

JOSEF SCHUSTER, FOUNDER OF IPO RESEARCH HOUSE IPOX SCHUSTER LLC, CHICAGO

“They’re using the preferred shares...to pay some dividends and probably lock up some key shareholders. They will obviously try to get some key investors in now, like some wealth funds from the Middle East. That will be the first strategy, and then they will basically do more formal marketing for the offering to more institutions and retail (investors).”

“It’s all in now, so by November it’s going to happen.”

SCOTT SWEET, SENIOR MANAGING PARTNER, IPO BOUTIQUE

”GM has two glaring weaknesses right now. Yes, it had two consecutive very good quarters, the best since 2004. But yet, even though the numbers are showing profit, they still have problems and their problems are large.

”One of them specifically is in Europe. They missed the chance to sell Opel. As a result, they’re losing several hundred million dollars. It’s an ongoing problem and it’s an albatross right now. They’re likely only going to be able to get dimes on the dollar for Opel now. They brought in all these new managers and they still couldn’t clean it up.

ARIEL HSIAO, MANAGER, HSBC‘S NEW RICH EQUITY FUND

”I can find other attractive names with lower risk for my portfolio.

“The U.S. market is recovering, but the growth is slow.”

REBECCA LINDLAND, IHS AUTOMOTIVE ANALYST

”It’s certainly another step in GM’s recovery, and it’s a significant step because it starts to reduce the government’s equity position in the company and that is the desired end result.

”Any IPO has risks to it and this economy is not recovering very quickly, so to wait for outside forces to settle down could take a long time. You can evaluate any time and establish pros and cons.

”The roadblocks are certainly getting investors to look globally at the company and getting the confidence flowing in investors’ minds that this company is truly restructured and a good investment.

”People may have felt a little bit more comfortable if there was another quarter or two of profitability like we’ve seen in the last two quarters. You can really say somebody is fully reformed when they’ve been out of rehab for a longer period of time.

“One thing overall investors aren’t recognizing fully is that these (U.S. auto) companies are making money in a variety of products now and that is not something that used to happen. That kind of diversity really needs to be recognized and rewarded.”

BRAD COULTER, DIRECTOR AT O‘KEEFE & ASSOCIATES

”If GM is valued in that $60 billion to $70 billion range, that gets the taxpayer paid back. But the question is, is that achievable for a company that is a year out of bankruptcy, that has just changed CEOs and that faces negotiations with the UAW? I just think that the risk of failure with the IPO is bigger than the risk of being known as Government Motors.

”Personally, I think they should wait and prove out their earnings.

“I‘m very positive about GM -- they’ve got good products, they’re blowing up the bureaucracy and hopefully Akerson can keep that going. My only question is with the timing of the IPO.”

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