GM up over 15% since IPO

[Puppycow]

Interesting. The IPO was $33. Now it's already up to $38.

http://www.google.com/m/finance?source=mog&hl=en&gl=us#search/gm

[Disbelief]

Selling 100,000+ more vehicles in December (compared to the year before) with only 4 brands instead of the eight probably helps.

[drkitten]

Selling 100,000+ more vehicles in December (compared to the year before) with only 4 brands instead of the eight probably helps.

It also probably helped that everyone was so down on GM, even while they were doing the IPO. (Re-read the financial reportage surrounding GM's IPO and see how many of them noticed that GM was actually making and selling cars profitably? It's not like it was a secret, except to the financial editors....)

I think GM will go down as a classic instance of market irrational groupthink. Yes, the company had problems, but they weren't nearly as great as Mr. Market whipped himself into a frenzy over.

[Almo]

Selling 100,000+ more vehicles in December (compared to the year before) with only 4 brands instead of the eight probably helps.

I've always been curious about why GM used the "huge number of brands" strategy. Hiding behind Opel and Vauxhall in Germany and UK. Whereas Ford is just... Ford. Everywhere.

[The Central Scrutinizer]

I've always been curious about why GM used the "huge number of brands" strategy. Hiding behind Opel and Vauxhall in Germany and UK. Whereas Ford is just... Ford. Everywhere.

Likely due to the way the company was formed.

[drkitten]

Likely due to the way the company was formed.

And differential marketing.

YUM brands is another example. It's basically a holding company that owns four brands of fast food: A&W Restaurants, KFC, Long John Silver's, Pizza Hut, and Taco Bell. But KFC was around long before YUM brands was, and people have a brand loyalty to KFC that would be lost if YUM re-branded its chicken operations as YUMmy Chicken or something. So YUM still operates KFC under the KFC name.

Same principle -- people don't buy "GM" cars, they buy Chevys or Pontiacs or Cadillacs. Cadillac was a symbol for luxury cars before GM bought it.

It also allows GM (or YUM) to market differently to different groups; Cadillac is a luxury brand, Pontiac is a performance brand, Chevy is an entry/family car brand,.... and KFC does chicken and Taco Bell does Tex-Mex. If I find that disgusting double-decker chicken sandwich, um, disgusting, I can still be persuaded to buy a taco or something.

[The Central Scrutinizer]

YUM brands is another example. It's basically a holding company that owns four brands of fast food: (1) A&W Restaurants, (2) KFC, (3) Long John Silver's, (4) Pizza Hut, and (5) Taco Bell.

Are you a math teacher? :)

[drkitten]

I've always been curious about why GM used the "huge number of brands" strategy. Hiding behind Opel and Vauxhall in Germany and UK. Whereas Ford is just... Ford. Everywhere.

Actually, this is only sort-of true and only recently at that.

Ford Motor Company until very recently controlled Ford, Mercury, Lincoln, Aston Martin, Volvo, Mazda, Jaguar, and Land Rover. They sold off most of those divisions to raise cash.

It's just that there's no "GM" brand to be the flagship of GM.

[drkitten]

Are you a math teacher? :)

How about an English teacher?

Diagram the following sentence : Bite me

[The Central Scrutinizer]

It's just that there's no "GM" brand to be the flagship of GM.

GMC Trucks was about as close as they came.

[Almo]

Ford, Mercury, Lincoln, Aston Martin, Volvo, Mazda, Jaguar, and Land Rover. They sold off most of those divisions to raise cash.

It's just that there's no "GM" brand to be the flagship of GM.

Oh yeah. :) Duh.

[CatOfGrey]

Interesting. The IPO was $33. Now it's already up to $38.

http://www.google.com/m/finance?source=mog&hl=en&gl=us#search/gm

Of course the stock is doing well. If your company just erased all its debt by 'decree from the king', then you would be happy, too. I wish I was like GM, and I didn't have to pay my debts.

Just to be clear, this may turn out to be a positive deal from the government. But the holders of GM debt are permanently screwed, and won't benefit one penny from this.

[LTC8K6]

But the Gov't sold a big chunk at a money losing $33...

http://www.investors.com/NewsAndAnalysis/Article/559843/201101131842/Taxpayers-Get-Bill-For-GM-Bailout.htm

[Weak Kitten]

You know, when you dump all of your debt and push out all of the subsidiaries who weren't doing well, it's not surprising that your stock would go up.

Shame that all this helps is the people who own the "new GM" stock. Those who owned stock before the bankruptcy now just own shares in those subsidiaries that GM has hung out to dry.

[Almo]

It also helps the people GM employs, right?

[Puppycow]

Of course the stock is doing well. If your company just erased all its debt by 'decree from the king', then you would be happy, too. I wish I was like GM, and I didn't have to pay my debts.


Just to be clear, this may turn out to be a positive deal from the government. But the holders of GM debt are permanently screwed, and won't benefit one penny from this.

What would the bondholders have gotten if the government hadn't lifted a finger to help GM?

[Puppycow]

You know, when you dump all of your debt and push out all of the subsidiaries who weren't doing well, it's not surprising that your stock would go up.

Shame that all this helps is the people who own the "new GM" stock. Those who owned stock before the bankruptcy now just own shares in those subsidiaries that GM has hung out to dry.

What would the stock in "old GM" be worth now if the government hadn't lifted a finger to help GM?

[LTC8K6]

What would the bondholders have gotten if the government hadn't lifted a finger to help GM?

We'll never know since the process was subverted, but they would have retained their normal spot in the assets line.

[Puppycow]

But the Gov't sold a big chunk at a money losing $33...

http://www.investors.com/NewsAndAnalysis/Article/559843/201101131842/Taxpayers-Get-Bill-For-GM-Bailout.htm

Even if the government doesn't get all its money back when it sells its remaining stock, if the company stays profitable it will pay taxes every year, and its employees will pay taxes. So eventually, the government is almost certainly going to get its money back and more one way or another in the long run.

[Puppycow]

It's just that there's no "GM" brand to be the flagship of GM.

GMC Trucks was about as close as they came.

I always used to think of Chevy as the main GM "flagship" brand. Didn't they usually sell more vehicles under the Chevy brand than any other brand?

[Furcifer]

I always used to think of Chevy as the main GM "flagship" brand. Didn't they usually sell more vehicles under the Chevy brand than any other brand?

I believe that was because Chevy was the "econo" line. As soon as they loaded up a vehicle it took on the Pontiac badging.
From a manufacturing standpoint Chevy sold the most frames, so it would be the "flagship" brand. The flagship brand, no quotes, would of course be Cadillac.

[NewtonTrino]

I bought a bunch of deep ITM option contracts (JAN 12 22.50) and they are up 35% so far (since 12/20 so less than a month). I feel good about where GM is going and I also consider the stock a bit of a china play. I haven't decided to go long or just take my profits (and of course they could go away if I'm not careful).

[Furcifer]

I bought a bunch of deep ITM option contracts (JAN 12 22.50) and they are up 35% so far (since 12/20 so less than a month). I feel good about where GM is going and I also consider the stock a bit of a china play. I haven't decided to go long or just take my profits (and of course they could go away if I'm not careful).

Hey, I was telling people to buy Ford in the "Is GM finished?" thread when it was at a buck something. It's at $18 now.

[Bob Blaylock]

Hey, I was telling people to buy Ford in the "Is GM finished?" thread when it was at a buck something. It's at $18 now.


And Ford is where it is without taking handouts from Big Brother, and without welshing out on its rightful obligations. Ford is where it is without cheating, as GM did.

As far as I am concerned, there are no longer three great American automobile manufactures. There is only one. There is only one that still stands for what the entire American automobile industry used to stand for. There is only one that is worthy of my business.

GM, in particular, is dead to me. What exists now under its name is a pretender, an impostor; not even a ghost of the real GM.

[Furcifer]

And Ford is where it is without taking handouts from Big Brother, and without welshing out on its rightful obligations. Ford is where it is without cheating, as GM did.

As far as I am concerned, there are no longer three great American automobile manufactures. There is only one. There is only one that still stands for what the entire American automobile industry used to stand for. There is only one that is worthy of my business.

GM, in particular, is dead to me. What exists now under its name is a pretender, an impostor; not even a ghost of the real GM.

This seems like a slightly emotional response to what is essentially a figure or logo.

I'm getting my money back. They're repaying the loan. It's not like the banking situation (thankfully my government didn't have to bail them out because they had the foresight to institute rules preventing abuse)

At the end of the day I think what it boils down to is people buy what they can afford. If it suits your needs and you can afford it you'll probably buy it.

Apparently that's what GM is doing.

ETA: maybe that Ford tip wasn't in the GM thread. I did a quick search and couldn't find it. It may have been in another thread at the time. I recall mentioning that although I wouldn't buy GM, Ford was still a good deal.

[LTC8K6]

Even if the government doesn't get all its money back when it sells its remaining stock, if the company stays profitable it will pay taxes every year, and its employees will pay taxes. So eventually, the government is almost certainly going to get its money back and more one way or another in the long run.

IIRC, GM got a huge break on taxes in the deal. Doesn't have to pay taxes on it's first $45B in profits. ie, 15-20 years...

[Puppycow]

IIRC, GM got a huge break on taxes in the deal. Doesn't have to pay taxes on it's first $45B in profits. ie, 15-20 years...

I looked it up, and it appears that you are correct (http://online.wsj.com/article/SB10001424052748704462704575590642149103202.html).

Still, their employees at least (the ones whose jobs were saved) will pay taxes, and won't have to collect unemployment benefits. If they were out of a job they would be receiving money from the government rather than paying taxes to the government.

[Puppycow]

And Ford is where it is without taking handouts from Big Brother, and without welshing out on its rightful obligations. Ford is where it is without cheating, as GM did.

As far as I am concerned, there are no longer three great American automobile manufactures. There is only one. There is only one that still stands for what the entire American automobile industry used to stand for. There is only one that is worthy of my business.

GM, in particular, is dead to me. What exists now under its name is a pretender, an impostor; not even a ghost of the real GM.

That's not entirely true. People seem to have forgotten that they did accept some help from the government, although they didn't go through receivership like GM and Chrysler.

Ford Gets $5.9 Billion Government Loan (http://www.foxnews.com/story/0,2933,528409,00.html)

A $25 Billion Lifeline for GM, Ford, and Chrysler (http://money.usnews.com/money/blogs/flowchart/2008/9/24/a-25-billion-lifeline-for-gm-ford-and-chrysler)

[Cleon]

So, does this mean we'll finally stop hearing people whine about how Obama's a socialist because he "nationalized" GM?




...No, of course it doesn't, who am I kidding...

[Doubt]

And Ford is where it is without taking handouts from Big Brother, and without welshing out on its rightful obligations. Ford is where it is without cheating, as GM did.

As far as I am concerned, there are no longer three great American automobile manufactures. There is only one. There is only one that still stands for what the entire American automobile industry used to stand for. There is only one that is worthy of my business.

GM, in particular, is dead to me. What exists now under its name is a pretender, an impostor; not even a ghost of the real GM.

The only reason Ford did not end up like GM and Chrysler is a matter of timing. Things at Ford got very bad before the 2009 collapse. So they were able to get loans when they needed them. Had Ford hit the skids when GM and Chrysler did, they would have been filing for bankruptcy as well.

[drkitten]

And Ford is where it is without taking handouts from Big Brother, and without welshing out on its rightful obligations. Ford is where it is without cheating, as GM did.

Nothing "cheating" about it. Restructuring and reprioritizing debts is a standard part of a chapter 11 bankruptcy. The major debt-holders were given the normal opportunity to object to a proposed reorganization, and as a group consented. (Yes, there were a few holdouts; bankruptcy law merely requires a supermajority of each class for a bankruptcy plan to be approved, not unanimity. This is standard business practice, as it keeps the guy who cuts the grass from being able to derail a multibillion dollar reorganization all by himself).

The debt holders consented, because they recognized that they'd rather further back in line for a payout that's likely to be made rather than first in line for nothing.

Business as usual.

[drkitten]

We'll never know since the process was subverted, but they would have retained their normal spot in the assets line.

Would you rather be first in line for nothing, or third in line and get something?

Bear in mind that the bondholders voluntarily gave up their spot in the assets line.....

[LTC8K6]

Would you rather be first in line for nothing, or third in line and get something?

Bear in mind that the bondholders voluntarily gave up their spot in the assets line.....

We will never know which would have been better, so it's a moot point.

[Bob Blaylock]

Nothing "cheating" about it. Restructuring and reprioritizing debts is a standard part of a chapter 11 bankruptcy. The major debt-holders were given the normal opportunity to object to a proposed reorganization, and as a group consented.


But none of that is what happened with GM.

[drkitten]

But none of that is what happened with GM.

That's simply wrong. Perhaps you missed the entire court battle when the minority stakeholders -- mostly bondholders -- sued to try to prevent the reorganization and were told by the Federal bankruptcy court (Judge Robert Gerber, Southern District of New York, IIRC) as a matter of law that they weren't a large enough plurality to stop it and that the only way to preserve any value for any of the stakeholders, including the bondholders, was to permit the plan to go through?

Really, if you're going to tell lies, you shouldn't tell lies that are so transparently counterfactual.

[drkitten]

We will never know which would have been better, so it's a moot point.

No, it's not a moot point. it's the basis on which the bondholders (mostly) made their call, and the basis on which Judge Gerber, the bankruptcy judge, ruled against the minority that was suing to stop the plan.

[The Central Scrutinizer]

I bought a bunch of deep ITM option contracts (JAN 12 22.50) and they are up 35% so far (since 12/20 so less than a month). I feel good about where GM is going and I also consider the stock a bit of a china play. I haven't decided to go long or just take my profits (and of course they could go away if I'm not careful).

Of course you did. I suspect you'll also sell right at the exact peak price.

[NewtonTrino]

Of course you did. I suspect you'll also sell right at the exact peak price.

Well I'll certainly be selling sometime between now and next january since it's just an option play. Whether I take a long position is TBD.