For the past few years, General Motors didn’t appear in the news without the words “unemployment” or “bankruptcy.” But it’s a new season for the automobile manufacturer, judged by the $20.1 billion in stock it raised through its initial public offering this week.
GM Holds Successful IPO
An initial public offering (IPO) is exactly what it sounds like—it’s a company’s first offer to sell stock to the public. An IPO is often undertaken when said company needs to raise capital, and GM is in a particular need after declaring bankruptcy and being restructured with the help of $49.5 billion government dollars. Since then, the Obama administration has held a controlling interest in the company, sparking dissatisfaction among some consumers. From the Wall Street Journal:
The government's rescue of GM has been a burden for the company in the market place because many consumers dislike the bailout. Some continue to view the company as "government motors." Some investors, meantime, have shied away from owning a company they think could face interference from the government.
Does Government Involvement Give GM An Advantage?
Because of the unusual government involvement, underwriters—those putting out the money and assuming the risk, like banks—are anxious about how the stock will progress. After its IPO price of $33 per share, GM stock is being watched carefully for either unusual gains, which could be viewed as unfair benefits for certain investors.
Industry Optimism Bodes Well
But the outlook of the less skeptical is reassuringly positive: General Motors is not only in the midst of its highest-earning year since 2004, but there has been a general upswing in American auto sales across the board. The public sale of GM stock has cut the government’s share in the company by nearly half, and it’s expected that it will be repaid nearly all of its investment. From CBS News:
"I now believe—and this is a more optimistic view than I've had before—I believe the government will get back all but $5 or $6 or $7 billion of that, which is an extraordinary success for the government in fixing this critical industry," [Obama auto task force head] Rattner said.
The General Motors ticker symbol is GM, and it is traded on the NYSE.
Tell us in the comments: What do you think of the government holding a controlling interest in one of America’s biggest companies? Do you think GM will be better off without them?