GM is likely to go public within the next three quarters, particularly if the economy avoids a double dip recession. The rumor is that JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) will lead the IPO. The US government says it may sell most of its shares as part of any offering.
US taxpayers have a net investment of about $43 billion in GM after the car company paid back $7 billion in loans from the Treasury this year.
The closest comparable company to GM is Ford Motor Company (NYSE: F). Ford has a market cap of $37 billion, $34 billion of debt in its automotive group, and $25 billion in cash. That makes the company’s enterprise value about $45 billion. GM has no debt because of the Chapter 11 process. So, the company should be worth $50 billion. That puts the value of the taxpayer’s share of GM at $30 billion, well below the $43 billion cost of the stake. Each company has obligations to employees and for trade payables which have not been factored in here, and some analyst estimates that GM is worth between $60 billion and $70 billion. It is extremely unlikely that the company is worth that much more than Ford, which is now one of the most successful car companies in the world
Are Americans likely to lose money on the GM restructuring? Yes. Would the government have been better of to sell it to Toyota? Probably.
Douglas A. McIntyre
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