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  1. #1
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    GM must sell for $134 a share to recover investment

    http://www.washingtonpost.com/wp-dyn...092205674.html

    GM must sell for $134 a share for U.S. to recover investment



    By Peter Whoriskey
    Washington Post Staff Writer
    Wednesday, September 22, 2010; 8:13 PM
    In order for the United States to recoup all of its $50 billion investment in General Motors, it must sell its ownership stake at $134 a share, according to the special inspector general of the government's bailout programs.


    The estimate comes as the automaker readies itself for a public stock offering, setting the stage for the government to withdraw from its majority stake in the company.

    The price needed for a full recovery of the U.S. investment is far higher than shares of the automaker have ever reached, and some analysts and government officials have expressed doubts that the United States will be able to recover the money.

    But with GM turning a profit in recent quarters, some Wall Street analysts have lauded the company's prospects, noting that it has shed much of its debt, discontinued brands, closed plants, and slashed its workforce. As a result, it is much better prepared to weather a slow economy - and could be very profitable when auto sales reach pre-recession levels, the analysts have said.

    Last week, in fact, Morningstar analyst David Whiston issued a preliminary estimate setting the shares' fair value at $134.

    "GM's cost structure is drastically improved," Whiston wrote in a Sept. 13 note to investors. "We think GM's earning potential is excellent because it finally has a healthy North American unit and can focus its marketing efforts on just four brands instead of eight. . . . We think it is critical for investors to know that GM now makes excellent car models as well as light trucks."

    After the $50 billion investment in GM, the United States held a 61 percent stake in the company, as well as $2.1 billion in preferred stock and a $6.7 billion loan. The loan has been repaid, and whether the government can recoup its investment depends largely on the share price.

    The government's estimate that the shares would need to sell for $134 came from Neil M. Barofsky, special inspector general for the Troubled Assets Relief Program, in a recent letter to Sen. Charles E. Grassley (R-Iowa).



    News of the estimate came as it was announced that Herbert M. Allison Jr., the Treasury official who has administered TARP, would be resigning. Allison had previously served as president of Merrill Lynch and TIAA-CREF.

    "The fact that TARP is now regarded by many experts as one of the most effective emergency programs in financial history is a direct result of Herb's leadership and all of your hard work," Treasury Secretary Timothy F. Geithner said. "This is not just our program to eulogize. The Bush administration started the job. We finished it."

  2. #2
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    Better start making affordable fuel efficient cars. What is it trading at now .75 cents?

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    That's not what the IPO will be. They haven't priced it.

    I dont' know if you know how IPO's work, but I'll give a quick rundown in case someone doesn't know.

    An analyst will judge the market on what it will bear. Then report this is what price you should get and still sell all the shares.

    So if an analyst says 100 a share, and you say nah screw it, 250 a share, chances are you will have no takers.

    In this case the 75 cent thing really has no bearing as it's the "old" stock.

    Cab if you want to recap or critique things I missed, please do.

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    Why would anyone pay good money for a GM IPO? I would be VERY leery of putting any kind of money into them knowing that if they went under again my stock would be worthless. After giving priority status to unsecured debtors they may find a very unfriendly market for their stocks.
    French writer Alexis de Tocqueville warned about when visiting this fledgling democracy in the early 19th century that this "American republic will endure until politicians realize they can bribe the people with their own money."

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    Quote Originally Posted by hoosiercubsfan View Post
    Why would anyone pay good money for a GM IPO? I would be VERY leery of putting any kind of money into them knowing that if they went under again my stock would be worthless. After giving priority status to unsecured debtors they may find a very unfriendly market for their stocks.
    Potentially, but there have been a lot of stocks where investors lost everything, and they are still around and back to healthy. Lots of fiber optics ones.

    I'm not condoning the bail out, just thinking investment wise. I won't buy GM, because I don't own anything in the auto industry, but that's just me. I don't think it's necc a bad buy

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    Quote Originally Posted by behindmydesk View Post
    That's not what the IPO will be. They haven't priced it.

    I dont' know if you know how IPO's work, but I'll give a quick rundown in case someone doesn't know.

    An analyst will judge the market on what it will bear. Then report this is what price you should get and still sell all the shares.

    So if an analyst says 100 a share, and you say nah screw it, 250 a share, chances are you will have no takers.

    In this case the 75 cent thing really has no bearing as it's the "old" stock.

    Cab if you want to recap or critique things I missed, please do.
    You pretty well have it covered, the only thing I would add is that the price per share is for the entire holdings, not just the IPO, however, and this is really aimed at HCF, the price seems to be in line with independent expert opinion as noted in the posted article.

    Now, I really like GM's current cost structure and (this has nothing to do with politics, this has to do with where I put my money) think it has a bright future. The have not only shed debt, losing brands, outdated factories, but most importantly, to me, horrible management that guided it into the ditch.

    In fact, it is the management, that gives me strong reason to evaluate my participation in the company.

    HCF, to answer your question, the current GM, pencils out to be a profit machine.
    Here is the question of the day, does anyone think that wealthy people should pay a lower percentage of their income to taxes than middle class people? Don't argue tax brackets, just a simple question. Do you think someone earning 46 million dollars should pay a lower percentage of their income than say someone earning sixty thousand?

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    Quote Originally Posted by cabernetluver View Post
    You pretty well have it covered, the only thing I would add is that the price per share is for the entire holdings, not just the IPO, however, and this is really aimed at HCF, the price seems to be in line with independent expert opinion as noted in the posted article.

    Now, I really like GM's current cost structure and (this has nothing to do with politics, this has to do with where I put my money) think it has a bright future. The have not only shed debt, losing brands, outdated factories, but most importantly, to me, horrible management that guided it into the ditch.

    In fact, it is the management, that gives me strong reason to evaluate my participation in the company.

    HCF, to answer your question, the current GM, pencils out to be a profit machine.
    I'd agree on the management mostly, but some of the problems have been many years coming.

    It'll be interesting to see how the union takes some of the cuts going forward. It's easy to get the cuts now, but when the company is making money, will it get bloated again. That and the auto industry is to up and down for my taste. But again that has nothing to do persay directly with GM, just on why I'm not interested in investing.

    Also to HCF's look at a company like Tyco, it went from over 200 a share to 50 in 6 months, I and others lost butloads. Then built it up and fell again. Still people think it's a good company

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    I will fully admit to the fact that I still don't like GM is that they are still under the contracts with the UAW. And I have absolutely no use for unions allowing someone to put a rivet in the same hole for as many hours as they want to work. To see people willing to lose their jobs completely over taking a pay cut to keep them is mystifying ot me. That very thing is happening here in Indianapolis with a GM stamping plant that is set to be closed with someone willing to come in and buy it. The union would not even allow a vote to be held by its members to see if they would accept the concessions or not. They were happy with keeping their jobs until its shuts down then sucking up unemployment while trying to find another job. They had to go around the union and mail out ballots in order for a vote to even be held.

    http://www.indystar.com/article/2010...ll-get-to-vote

    This is why I don't like them and admit fully that it is my bias against unions and their bloated contracts.
    French writer Alexis de Tocqueville warned about when visiting this fledgling democracy in the early 19th century that this "American republic will endure until politicians realize they can bribe the people with their own money."

  9. #9
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    What is it trading at now .75 cents?
    Well I hope it's worth at least 1 cent!
    "If [Republicans] were around when Columbus set sail, they must have been founding members of the Flat Earth Society." -- Pres. Barack Obama

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    Quote Originally Posted by behindmydesk View Post
    I'd agree on the management mostly, but some of the problems have been many years coming.

    It'll be interesting to see how the union takes some of the cuts going forward. It's easy to get the cuts now, but when the company is making money, will it get bloated again. That and the auto industry is to up and down for my taste. But again that has nothing to do persay directly with GM, just on why I'm not interested in investing.

    Also to HCF's look at a company like Tyco, it went from over 200 a share to 50 in 6 months, I and others lost butloads. Then built it up and fell again. Still people think it's a good company
    Investments, like athletes, need to be evaluated on a periodic basis. What will happen in the future with labor contracts is something that I can look at then and evaluate it in terms of structure. As for now, I really like their structure going forward.
    Here is the question of the day, does anyone think that wealthy people should pay a lower percentage of their income to taxes than middle class people? Don't argue tax brackets, just a simple question. Do you think someone earning 46 million dollars should pay a lower percentage of their income than say someone earning sixty thousand?

  11. #11
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    Quote Originally Posted by cabernetluver View Post
    Investments, like athletes, need to be evaluated on a periodic basis. What will happen in the future with labor contracts is something that I can look at then and evaluate it in terms of structure. As for now, I really like their structure going forward.
    Oh absolutely, I will do the same, just starting from different places.

  12. #12
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    Quote Originally Posted by DodgersFan28 View Post
    Well I hope it's worth at least 1 cent!
    I originally put a $ in front of .75 but it looked weird to me. So I wrote cents but forgot to remove that ever so important decimal point.

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    http://online.wsj.com/article/SB1000...139305206.html

    That shouldn't happen at all, till the IPO. The stoppage of political gift giving to either side, shouldn't happen, till the government doesn't have a stake in the company

  14. #14
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    Quote Originally Posted by behindmydesk View Post
    That's not what the IPO will be. They haven't priced it.

    I dont' know if you know how IPO's work, but I'll give a quick rundown in case someone doesn't know.

    An analyst will judge the market on what it will bear. Then report this is what price you should get and still sell all the shares.

    So if an analyst says 100 a share, and you say nah screw it, 250 a share, chances are you will have no takers.

    In this case the 75 cent thing really has no bearing as it's the "old" stock.

    Cab if you want to recap or critique things I missed, please do.
    Well the highest that GM ever traded for was $93.62 and that was when the economy was unreal. It will be a long long time if ever that we see GM get up to $134 per share.

  15. #15
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    Quote Originally Posted by steelcityroller View Post
    Well the highest that GM ever traded for was $93.62 and that was when the economy was unreal. It will be a long long time if ever that we see GM get up to $134 per share.
    Not necc at all. Without looking at how many outstanding shares there were, if there were say 2 million at 93.62, but now they only have 1 million shares it could change things.

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