Back in August, GM filed a prospectus for the US Treasury to sell shares. In that prospectus, GM would have 500 million shares outstanding. No price talk was given, leaving analysts a lot of room to guess. "Old GM" debt was trading around 32 cents on the dollar.
Yesterday, GM filed a new prospectus for the US Treasury to sell 365 million shares at $26-29. The company will have 1.5 billion shares outstanding and a market cap at the midpoint of $41 billion.
My original forecast was a market cap of $30 billion back in late August, but the market is up and, more importantly, Ford's (F) market cap is up $12 billion.
What about buying this offering? I intend to participate even though I feel that Ford is a better company.
I intend to participate in the offering because I expect the stock to go up. (Why else?)
GM has a lot of issues, like the pension plan. Notwithstanding that, GM has a lot of earnings power in a market where 15-16 million cars are sold in the US, and GM is getting some tax breaks too. Also, the stock will find its way into the indexes and that will create demand. Closet indexers will have to buy it too, more likely in the aftermarket than on the offering.
The bond market "knew" this all along. The bonds are still at 32.
I sold my bonds but intend to buy the stock on the offering.
Disclosure: Long Ford, no position in GM