GM's IPO Pricing: Too Low to Repay Taxpayers?

Reuters has been able to get sources working on the GM IPO road show to divulge some details about the plan. The most depressing is that the deal will price well below the level that would get U.S. taxpayers back the money that they put into the No. 1 automaker. And the price may be less than what it may need to be to bring in a large number of new investors.

"A decision to price the initial GM shares below the cost to taxpayers would follow the usual Wall Street practice of giving the first investors in a new stock a discount," Reuters reported. "But it could also help allay investor concern in the face of the slow recovery of the U.S. economy and flat auto sales." The entire amount that the government put into GM is about $50 billion.


The news service goes on to say that the government could take years to sell its entire stake, which means that the actual amount of the return wouldn't be known anytime soon. This approach would be a good deal different from some of the "investments" made in bank equity and debt as part of the TARP program. Most of those have be recouped as companies like Goldman Sachs (GS) have paid the government back at rates that represented good returns.

Statements, especially those by former GM CEO Ed Whitacre, might have caused taxpayers to believe that the return on their GM investment would be strong and could happen rapidly. If the government is slow to "cash in" and the auto market continues to face headwinds as it did in August, American taxpayers could still be left with a cents-on-the-dollar return for their GM investment.

Increase your money and finance knowledge from home

Income Investing

Grow your nest-egg.

View Course »

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum

17 Comments

Filter by:
strangersat

What would have been the cost to you if GM failed. the taxpayer ,unemployment ins,they pay health insurance on over 1 million people ,workers and retires and there familys and the goverment backed retirment fund,that every one has and many more cost that the tax payer would pay to close GM or any company of that size and the long term cost.The loan is small pray that they survive. and they pay it back and dont send you the long term bill

September 07 2010 at 9:18 AM Report abuse +1 rate up rate down Reply
Gumby

Warren Buffet wouldnt buy one lousy share in GM IPO. Over His Dead Body!!!!!!!!

September 06 2010 at 7:47 PM Report abuse -1 rate up rate down Reply
easysolution

Just buy the IPO and flip it for a fast buck. Worry about what you can do to help yourself, instead of crying about something that you cannot change. The money is already 'invested' in GM by the government. No point whining about it any more...it's a sunk cost.

September 06 2010 at 3:26 PM Report abuse -1 rate up rate down Reply
1 reply to easysolution's comment
jmaltus

Did anyone really think that anything else was going to happen. The mantra is to reward the management of a failed company while the taxpayers take the pipe. the usual game congress plays: stick it to the tax payer.

September 06 2010 at 3:15 PM Report abuse rate up rate down Reply
vdema26408

We will now see just how many individual investors are stupid enough to give their hard earned after tax cash to the greatest con game on the face of the earth.GM, Government Motors is again nothing but a wellfare program for the UAW subsidized by the Congress with tax payer and borrowed money.The wall street gangsters with the aid of Obama will promote this IPO to suck the American public back into a game they can never win.

September 06 2010 at 1:41 PM Report abuse rate up rate down Reply
Gumby

Government Motors got $50 billion in bailout "loan" then it want to sell IPO stock to pay the loan back or to give to UAW retirement fund, Your pick!

September 06 2010 at 12:57 PM Report abuse rate up rate down Reply
1 reply to Gumby's comment
carlton

The economy could get a big boost if fed.& state taxs were not counted if older retired people could buy a home(first or second or vacation)with IRA money tax free.A lot of iras have $500k plus that we will probably just sit on and give to our kids to squander.with fed tax 15% to 28% plus 7% state tax ,i will just leave it siting and not creating jobs. carlton

September 06 2010 at 8:49 AM Report abuse rate up rate down Reply
kv37

Sorry, not interested. I have no faith in GM.

September 06 2010 at 4:40 AM Report abuse rate up rate down Reply
David

This is what happens when you get non-automotive CEO's running the Company. And here comes the Volt with an added price increase of $20,000 before it even hits the showrooms! Can't wait for the next Roger Smith move.

September 05 2010 at 8:40 PM Report abuse +1 rate up rate down Reply
REEDWIRELINE

oh boy...I want all I can get of Chairman Omama's snake oil IPO...yep..I want to do business with UAW/OMAMA motors ...The Carnie Pitchman is at it again...same crap, new package...get over it GMC is gone...next...

September 05 2010 at 8:20 PM Report abuse rate up rate down Reply