Ford's Public Offering Is a Smart Move

The Ford Motor Company (F) has announced it will offer 300 million new shares for sale. The proceeds are to be used to fund general corporate purposes and a portion of the company's obligation to the Voluntary Employee Benefits Association (VEBA) retiree health care trust.

At a time when the car market is depressed and will likely continue so for many months, Ford may need additional cash, and this is a smart way to find it. In addition, minimizing the stock it may have to offer the UAW as part of negotiations to further trim labor costs is a smart move too.

Ford is gaining retail market share, and separating itself from GM and Chrysler in the minds of car buyers and investors. A successful share offering could reinforce the positive image gains and car buyer confidence now being generated by its strong line up of new vehicles.

From the Focus to the Flex, Ford is separating itself from the pack. In many categories, its cars now challenge offerings from Toyota and Honda for best in class. This is a good time to raise needed additional cash.

Comments

[Ricard:]

Agreed. Ford's recent stock recovery makes this a prudent move. I for one will steer clear of all automobile manufacturers.

I'm amazed that shareholders will only suffer 10% dilution. IMHO there's something wrong with this picture.

May 12 02:50 AM

[Douglas Kor...:]

"Dilution" is a loaded term, and inaccurate. Ford already has a lot of shares; it's not a "dilution" unless the new shares are sold below the current share price (informally), or below book value (technically).

A fair stock offering should not undercut current shareholders at all.

No doubt, Ford may decline a bit in the short run, due to hysteria and misinformation; I am short Ford Puts, so will expect that I will receive a number of shares. But IMO in the long run, the additional capital will make Ford a stronger company.

And if profits ever come back, then Ford might return to its traditional price range in the 20's, Ford could easily make $1 per share profit.

Ford survived, despite the specter of GM's self-destruction, and thanks to good management. We appreciated Bill Ford's stopping the crushing of RangerEV.

GM was controlled by funds more highly invested in Big Oil, while Ford is controlled by the Ford family, which evidently wants Ford to survive and isn't as beholden to Big Oil.

May 12 04:38 AM

[Larry M.:]

Yes Fords move to Create 300 Million New Share is a Good Move. And it is a Bad Sign that they even Need to do this to Survive.

May 12 05:06 AM

[Tdot:]

On May 12 05:06 AM Larry M. wrote:
"Yes Fords move to Create 300 Million New Share is a Good Move. And it is a Bad Sign that they even Need to do this to Survive."

.....................

Not necessarily a bad sign.

With Ford stock tripling (along with its Market Cap) in 3 months and quadrupling in 6 months, and trading at a premium of as much as 50% over target ($6.50 / $4.37), basically on speculation that Ford might pull through this and succeed without direct government/taxpayer intervention, now is the time for Ford to cash in on that "asset", at a small and hopefully temporary cost to share owners.

The common stock "dilution" would be closer to 12.5% (300 million out of 2.4 billion), so the share price could be expected to naturally settle at around $5.60 to $5.70 near term (before further speculation and profit-taking or automatic / panic-sells) if the last week's Market Cap is anywhere near appropririate for the times. Some "correction" is almost inevitable when you have a lot of happy speculators taking profits and heading for the exits. But these might be balanced if (and as) more funds, individuals, and institutions dump GM and look for potential growth alternatives as GM's Day of Reckoning approaches.

May 12 07:31 AM

[412295:]

Ford will survive very well. I forsee the stock forging ahead in the next year to be in the 20 dollar a share range .

May 12 07:46 AM

[Greg Aryous:]

Any buyers here of Ford (F) stock?

I did a few months ago when it was at $1.50 in my Roth IRA - bought thousands of shares :-) all tax-free gains thank you very much.

I'm looking forward to that $20 price target so i can retire soon!

May 12 12:45 PM

[qw:]

Agree with Ford's move. It will be a shortterm setback in stock price, but when the market returns and if GM is forced to go through bankruptcy, the increase in Ford's market share will make the share price loss look insignificant.
With the right conditions $20 price is not wishful thinking.

May 12 10:01 PM

[sethmcs:]

Ford has a built in gain of 3 billion from the 10 billion debt swap going into the second quarter. I hope they use the proceeds to offer a second debt swap. Beware shorts if they do.

May 12 11:28 PM

[Frank Reade:]

I don't know, I'm glad I'm not in Ford's position.

Automotive giants is falling like flies, and moving across the world to try to remain profitiable. Not Ford. They continued to make improvements even in a negitive enviroment.

I think the big picture is of significance, namely; reliable and affordable transportation. Ford now have the best line-up on the planet, and these offerings is just the beginning. The bev vehicles will start to become availiable in a few month.

Ford could leave if they wanted, but the fine folks at Ford decided to stay put, and weather out the storm on our soil and provide their fine folks that work for them a future and hope.

Another thing, if they sell these shares, what's it too ya? Simply don't buy any. I see alot of finger pointing from this forum, but I don't see any answers from you. Please use your head for something else than a hat rack.

I think Bill Ford is an American Hero.

One last thing, he's got on board some brilliant minds. Some of them might even be as smart as some of you. But some would doubt that.

May 14 01:50 PM