We've been down this road before:
Hey, didn't you hear that the GM bailout is working out just swell! Why, we're likely to make us a profit on the bailout, so let's not dawdle over details, such as whether the whole goddamn thing was even legal in the first place (because it wasn't!).
The first time we heard this happy-happy line was when then CEO Ed Whitacre took to the airwaves to lie about GM's payback of its TARP loans "in full and ahead of schedule." (See below for why that argument had about as much credibility as a Chevy Citation's cooling system).
Now GM has done its first stock IPO and everything is on track for a happy ending. Right? Right! Right?
GM sold about 478 million shares Wednesday at $33 each, a price higher than the company and its bankers thought was possible just days ago. An additional 71.7 million shares are expected to be sold by GM's bankers as part of an "overallotment" allowed when sales are stronger than expected. And it sold $4.35 billion in preferred shares.
So come on, tell us, how'd we (and by we, I mean the taxpayer/owners) do? The good news is that the sale will reduce the government's ownership stake from about 61 percent to 26 percent. The bad news?:
With Wednesday's sale, including the overallotment, the Treasury lost roughly $4.5 billion on GM shares it acquired at an effective cost of $43.84 apiece. The Treasury would need to reap $26.4 billion, or an average of $52.79 a share, on its remaining stake to break even.
But the important thing to remember is: The IPO proves the GM bailout wasn't just good politics, but good business. Got it?
All those questions about the rule of law, whether it's a good idea for the government to bail out a company that lost records amount of dough the very year it sold the most cars ever, whether the domestic-owned auto industry is locking in amber workers and resources that could be productively used elsewhere, or even whether the feds coulda made more money parking that $50 billion in a Bank of Iceland Christmas Club account -well, just forget 'em.
There's nothing to see here, just poor-performing tales that will continue to roll off the media assembly line like so many 2010 Chevy Cobalts destined for scrap heaps.
Thursday, November 18, 2010
The real story behind GM's stock offering
Nick Gillespie at Reason cuts through the fawning media coverage of GM's multi-billion dollar stock IPO: