Government Motor's (GM) common stock was priced at $33 a share. The total offering size will be approximately $20.1 billion. Wow! The hype from Wall Street this morning is staggering. You would think that GM has found the cure for the common cold, cancer, obesity and whatever is out there. To say the least, GM is not a bargain at these prices. Who knows when it will pay a dividend. Also, it has some auditing issues to be resolved. But, then again, the government needs GM shares to rise sharply over the coming years for it to be repaid in full for its $49.5 billion loan.
For today, investors will watch for the size of the first-day "pop" of an initial public offering (IPO). If the shares rise more than the usual 10% to 20%, some observers may say GM and the government priced it too low. If the shares falter, it will mean some investors still question GM's future. I, for one, don't consider today's price action that critical. The IPO will be a success! It has to be because of the greater fool's theory. In other words, it is not today but in weeks and months to come. Caveat Emptor!
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