General Motors IPO: Baffled by the Negativity

|
Includes: F, GM
by: Preferred Research

First, the GM IPO was a good deal and anyone with any real Wall Street connections knew that would be the case. I am baffled by all the negativity towards this offering on Seeking Alpha.

Second, all the talking heads (Cramer, etc.) pounding the table to buy Ford (NYSE:F) overlooked one important fact. When the institutions acquired large positions in GM on the IPO, they would reduce other Auto industry holdings to avoid being way too overweighted in that industry, so they lightened up on F. Common sense right?

Third, the underwriters have a 71 million share short position and they will support the stock at $33. The insiders know this and will buy GM as it approaches 33 like a tightrope walker with a net 5 feet underneath him. Initial resistance is in the $35.80-36 area where big selling came in on Thursday.

Fourth, there is a lot of misinformation about the tax loss carry forward that GM brought in from the "old GM." That was a deal to get "old GM" pension liability to transfer to the new GM. The net effect is zero, the numbers, both around $40 billion, wash.

I think you can buy GM (or even better the GM.pr.B) and make money over the next 60 days. My target for GM is $39.

Disclosure: Long GM, long GM.pr.B, long F