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General Motors (GM) IPO of $10 billion plus $3 billion of preferred stock
with a market cap of $46 billion at the price range mid-point of $27.50 |
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Scheduled for Thursday, November 18, 2010 |
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CONCLUSION |
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IPO investors can expect to make money on GM’s IPO. |
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The investment community hammered down the pricing of GM’s IPO almost 50% from the $82 billion valuation floated the first part of August, 2010. |
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Compare P/E ratios annualized for the nine months ended September 30, 2010
GM: 8.5
Ford: 20
Toyota: 18 |
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50% LOSS |
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on government's $50 billion bailout 'investment'. At the mid-point of the price range government's value is $25 billion = 50% loss. The governmnent has been 'repaid' $6.7 billion but that was by borrowing from another government fund which doesn’t count -- borrowing from Peter to pay Paul. |
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NO COMMON STOCK DIVIDENDS |
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Common stock holders can’t expect to receive any dividends until restrictive debt covenants are removed and unless all preferred stock dividends are current, or until all preferred stock is retired |
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UAW FUNDS RECEIVE $8 BILLION
from the offerings and newly issued common stock |
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GM has agreed to pay the UAW an additional $6 billion for its pension fund, payable on the offering
. $4 billion in cash from IPO stock and new preferred stock sales
. $2 billion in newly issued common stock
In addition, the UAW Pension fund will receive another $2 billion in cash from a stock sale |
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On an ongoing basis the UAW Pension fund receives $500 million per year in interest from GM preferred stock, that was issued post bankruptcy |
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DISCRETIONARY PENSION FUND PAYMENTS
GM expects to make (further) discretionary contributions to its U.S. pension plan. |
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STRUCTURAL GM COMPETITIVE ADVANTAGES |
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. Tax loss carry forward could be worth up to $45 billion according to the Wall Street Journal, from a special one-time federal exemption
. No interest payments required on $37 billion in UAW pension-related liabilities |
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DECEMBER QUARTER RESULTS TO BE DOWN |
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GM expects "to generate positive EBIT in the fourth quarter of 2010, albeit at a significantly lower level than that of each of the first three quarters, due to the fourth quarter having a different production mix, new vehicles launch costs (in particular the Chevrolet Cruze and Volt) and higher engineering expenses for future products." |
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USE OF PROCEEDS |
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Sources of Funds: |
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. Cash on hand, $3,245 million
. Net proceeds from the Series B preferred stock offering, $2,895 million
Total sources, $6,140 million |
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Uses of Funds: |
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. Purchase of Series A Preferred Stock from the US government, $2,140 million
. Cash contribution to U.S. hourly and salaried pension plans, $4,000 million
Total uses: $6,140 million |
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August 16 GM preliminary IPOreport |
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VALUATION METRICS |
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Post-IPO shares: 1682mm |
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General Motors |
GM, C+, 7 |
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includes convertible preferred & stock paid to union pension fund |
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Autombiles |
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Detroit, MI |
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June6mos10 |
Sept3mos10 |
Sept9mos |
IPO Mkt |
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Revenues ($mm) |
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$64,000 |
$34,000 |
$99,000 |
Cap ($mm) |
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Gross profit ($mm) |
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$13,000 |
$46,255 |
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Gross profit % of rev |
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13% |
@$27.5 |
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Operating income |
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$4,800 |
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Operating income % of rev |
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4.8% |
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Net income |
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$2,100 |
$2,000 |
$4,100 |
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Net income % of revenue |
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3% |
6% |
4% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
1.5 |
2.5 |
1 |
7 |
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COMPARE & CONTRAST |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
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annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
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General Motors (GM) |
$46,255 |
0.4 |
8.5 |
1.5 |
-4.2 |
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Ford (F) |
$57,130 |
0.4 |
20 |
-32.8 |
-30.7 |
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Toyota (TM) |
$118,000 |
0.5 |
18 |
1.0 |
1.0 |
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