Thursday, November 18, 2010

GM is now the computers' favorite name

The computer traders went nuts on GM today trading nearly 500 million shares in the stock (that's basically the entire number of shares outstanding). The defense of the $34 line in GM was funny to watch at the end of the day. Every time someone stepped up to buy a little stock to support the price they were hammered with sell orders. I spent a number of sleepless nights dealing with IPOs that bounced around their IPO price. If they break the IPO price - GM's line in the sand will be $33 - there will be plenty of bankers sweating into their stuffing next week.

While it is interesting to see the scale of the GM IPO - north of $20 billion - it's worth noting that GM received none of the proceeds. A normal company goes public to allow it's investors a way to cash out and raise money for the company to fund its expansion. The bulk of the proceeds from this IPO go to repaying the US Treasury, to reserve for UAW healthcare costs, to fund the pension liability and to fund retiree benefits of non-UAW workers.

Boy, if we could just IPO the US Postal Service we'd be golden!

1 comment:

The Hermit said...

The unions won.