How can GM have an IPO?
General Motors is hitting the business headlines again, this time for two reasons. First, the CEO, Ed Whitacre, brought in back in January to right the ship, will be stepping down and Daniel Akerson (a current GM board member) will take over September 1st. It wasn’t much of a surprise because Whitacre is 68 and his reign was intended to be short term with the focus being put on getting GM in a better financial position. The other news is only speculation so far, but it involves the possibility that GM will be offering public stock once again through an IPO (an IPO filing is expected today). If you aren’t an avid investor or forgot some of the details involving government bailouts, bankruptcies, and business failings from the past couple years, here is a quick refresher on what happened with GM and its stock.
GM filed for bankruptcy and all of the publicly traded shares were liquidated, courtesy of the new temporary owners which included the “U.S. Treasury, the governments of Canada and Ontario, the UAW VEBA and Motors Liquidation Company.” 1 Then, thanks to some savvy name changing, General Motors Corporation became Motors Liquidation Company and Motors Liquidation Company sold the “good” assets to the “new” GM named General Motors Company.
It sounds confusing, but the separation was a way for GM to separate the bad assets from the good. It has enabled General Motors Company to declare themselves free from bankruptcy. After all, those bad assets are now the property of Motors Liquidation Company. Still confused? Imagine Bob getting arrested for a robbery. Bob changes his name to Tom, and the newly named Tom says “I never robbed that bank. Bob did.” That’s it in a nutshell, and now Tom, I mean the new GM will likely be issuing new stock in the near future. The only question is whether there are enough investors still willing to forgive and forget the financially crumbled past and jump back in.
Now that you’ve had a refresher course on the situation, you can weigh in with your opinion when Uncle Frank reminisces about the good ol’ days of the American auto industry.
Read on:
Freep.com – Wrong time for GM IPO? Not necessarily
SmartMoney.com – Who Is Going to Buy GM Stock?
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