Historic Day: GM Returns to Public Stock Trading
By Michelle Krebs November 18, 2010
And they're off!
General Motors shares are once again being publicly sold after a 17-month hiatus that included the filing and emerging from Chapter 11 bankruptcy.
CEO Dan Akerson, GM's fourth CEO in less than two years, rang the opening bell to mark the start of today's trading on the New York Stock Exchange. The original GM stock, once mong the world's most widely traded stocks, was first listed on the exchange in 1916.
And the opening was a strong one. GM had announced Wednesday night that the stock was priced at $33 a share; it opened at $35 a share, though volatility is often a hallmark of IPOs.
"Going public is an important milestone of being a new, different and better GM," Akerson said in a call with the media and analysts. "the market has shown a lot of enthusiasm for the stock, and we have a lot going for us.
"As importantly," added Akerson, "we know how we arrived here; we know what went wrong; and we learned from it."
Akerson further said the auto company "knows who stood by us" -- from employees to U.S. taxpayers.
Indeed, in the days leading up to the launch of the new GM stock, the enthusiasm had become obviously. It was clear the auto company's executives had done a good job of convincing investors of the stock's value. On the eve of the IPO, GM announced the total offering would be worth more than $20 billion, making it one of the largest IPOs in history. GM said the stock was priced at $33 a share, at the top end of the range GM had previously provided. In addition, GM upped the number of shares it would sell because of strong demand.
As a result, the U.S. government, which took a 61-percent stake to bail the automaker out of bankruptcy, will reduce its holdings by about a third. The rest of the government's stake will be sold over time depending on market conditions.
Spinning a Good Yarn
What's clear is GM executives, who traveled the globe with their road show for investors in recent weeks, spun a good yarn that emphasized GM's strengths and provided confidence to investors that GM had its weaknesses handled.
GM convinced investors that it has a vastly improved cost structure, thanks to its Chapter 11 bankruptcy that allowed it to ditch poor-performing assets and an immense amount of debilitating debt.
The new cost structure now allows GM to invest in new vehicle development and capitalize on growth opportunities not only in North America but more importantly abroad, where GM is stronger than most of its competitors. In fact, in the weeks leading up to the IPO, GM announced it would be the first automaker to sell 2 million vehicles a year in China.
Further, investors likely were cheered by the fact that GM, as have Ford and Chrysler, lowered its fixed costs to the point that it can make money even at the inevitable low end of the economic and car-sales cycle. Edmunds.com's forecast for 2010 is 11.5 million vehicles this year, much improved from 2009's 10.3 million but a far cry from the 17 million sold only a few years ago.
Most certainly, Opel, GM's money-losing European operations, gave potential investors pause. GM executives apparently convinced them, however, that it was executing a plan that would put GM Europe at breakeven or earn a modest profit near term.
GM had put Opel up for sale and actually had an offer to buy it, but the new board of directors reversed that decision, saying the operations could be turned around and were a critical element of GM's global presence. Indeed, Opel models serve as the basis of numerous GM vehicles sold globally including the Chevrolet Cruze, just launched in the U.S. this fall, and the Buick LaCrosse and Regal, which are the Opel Insignia underneath them.
Europe also has strong research and development operations particularly expert in the areas of fuel economy and CO2 reduction technologies essential to meet more stringent standards in the future. 
Wind at its Back
Like Ford, GM can't ignore that fact that, in some sense, it was lucky as well.
October car sales in the U.S. showed signs of hope, with the retail consumer tip-toeing back into dealer showrooms. The stock market perked up and the U.S. economy began showing signs of life.
GM's years of work to improve its product line also began paying dividend leading up to the IPO. Most notably, this week GM's electric-driven Chevrolet Volt won the Car of the Year award from Motor Trend magazine as well as its sister publication, Automobile. They are undoubtedly the first of many awards for the car. In addition, General Electric announced it would buy 12,000 of them for its corporate fleets.
Photos by GM
1 - GM celebrates its return to the New York Stock Exchange.
2 - GM vehicles are parked outside the stock exchange.
3 - GM CEO Dan Akerson rang the opening bell to being Thursday's trading on the New York Stock Exchange.
LEAVE A COMMENT