GM's IPO Is "a Political Event," James Altucher (Hedge Fund Manager) Says: "Stay Far Away"

Tech Ticker- Yahoo Finance ^ | 8/19/2010 | Aaron Task

[Qbert]

There are 8 million stories in the naked city and over 8000 publicly traded stocks to choose from, so don't waste your time on GM's IPO.

That, in a nutshell, is James Altucher's view of the most widely anticipated IPO in recent memory.

"Absolutely I would not go anywhere near the IPO, says Altucher, managing director at Formula Capital. "GM is one huge question mark."

Altucher notes GM has only had two quarters of profitability prior to its filing, which is mainly a "political event," he says. "It's a great PR event right before the November elections [but] I would stay far away from this."

Among the many "unanswered questions" surrounding the company, the hedge fund manager and author cited the following:

-- What is General Motors?

-- How they going to deal with losses in Europe?

-- What's the plan for the underfunded pension?

-- How much money are they going to raise?

-- How many shares are the U.S. government and UAW going to sell?

-- What's the dividend on the preferred stock?

-- How will the preferred trade visa vis the common?

-- Will the government make back its $50 billion "investment"?

Some of these questions will presumably be answered during GM's road show and "all the news is going to be about GM" prior to the offering, Altucher says. "But it's zero interest to me. In terms of just mental energy I wouldn't spend it on GM at this point."

[freedom1st]

After how Obama screwed GM’s bond holders, I would never buy any GM stock or cars.

[Loyal Buckeye]

Exactly. This IPO should be trashed by anyone who cares about the free market system.

[CMailBag]

The stockholders didn’t do real well either.

[MarkL]

I also heard that the filing with the SEC states that GM has no internal controls over its finances... And let's not forget the little fact that the very bond holders who are normally protected by bankruptcy laws lost their investments thanks to the obama administration and their union goons...

Yes, I'll certainly be buying up LOTS of GM stock...

I have a feeling that another reason for this IPO before the November elections is to raise A LOT of money for the UAW, which will probably be selling a bunch of their GM shares to help finance the election!

Mark

[SERKIT]

Where is the class-action lawsuit as a result of the bond-holders having their wealth transferred to the evil marriage of the unions and White Crib? I saw a lawsuit for the Chrysler dealers, but any word on the GM dealers?

[Avid Coug]

Usually, the investment circular required by the SEC for an IPO requires the company to list virtually any and all potential risks imaginable. I would think this would include the risk that the fed. govt. will cancel or nullify the shares being sold, nationalize the entire company, give control to the UAW, etc., etc., based on recent events. The circular should provide a political field day for Republicans, if it is written to meet strict legal requirements.

[Qbert]

The actual disclosure regarding the internal controls over financial reporting was:

“At June 30, 2010 we concluded that our disclosure controls and procedures were not effective at a reasonable assurance level because of the material weakness in our internal control over financial reporting that continued to exist. Until we have been able to test the operating effectiveness of remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in the future in a timely and reliable manner.”

Yeah, I would say that particular risk is pretty important...

And there were other potentially problematic non-”boilerplate” risks disclosed as well. A great article analyzing GM’s S-1 filing:

http://www.thetruthaboutcars.com/gms-s-1-ipo-filing-the-risks/

[USFRIENDINVICTORIA]

GM’s (amongst other companies’) recent sales were bolstered by at least three government interventions:

* The “cash for clunkers” program, which created unusual demand for replacement vehicles;

* The subsidies for hybrid and electric vehicles ($7,500/Volt); and

* Extremely low interest rates -- set by federal monetary policy.

There's another possibility -- one that may be nothing more than a coincidence; but it's too convenient a coincidence for me:

* The intense hoopla over the Toyota “run-away acceleration” problem.

Almost as soon as GM became “Government Motors”, problems are discovered with their major competitor & federal agencies are turned loose. It could be nothing but a coincidence — but, it smells.

Are recent sales levels sustainable?

[Qbert]

“GM’s (amongst other companies’) recent sales were bolstered by at least three government interventions:

* The “cash for clunkers” program, which created unusual demand for replacement vehicles;

* The subsidies for hybrid and electric vehicles ($7,500/Volt); and

* Extremely low interest rates — set by federal monetary policy...”

Yeah, good points- although I’m not sure if the sales from cash for clunkers were part of their recent reported numbers- I forget when that program officially expired after it was extended. GM also relied heavily on sales to the *government*, and daily rental fleets- i.e. retail sales were pretty weak compared to the industry.

I posted an earlier article that discusses the future sales issues further:

http://www.freerepublic.com/focus/f-news/2573612/posts

[Qbert]

“I have a feeling that another reason for this IPO before the November elections is to raise A LOT of money for the UAW, which will probably be selling a bunch of their GM shares to help finance the election!”

Yeah, that wouldn’t surprise me at all...

Plus, I think the commissions are going to be a lot lower than normal for the lead underwriters (to leave more in the coffers for the UAW), and it looks like they’re going to try to really snooker small-time investors on this:

“...As GM gets closer to selling shares to the public, it must decide what percent of the IPO to sell to institutional investors and what percent to sell to retail investors. It is currently considering selling 20 percent to 30 percent of the IPO to retail investors — more than the 20 percent typically sold to retail, one of the sources said.”

http://www.foxbusiness.com/markets/2010/08/13/bofa-citi-added-lead-gm-ipo-underwriters-sources/

[richardtavor]

A vote for GM is a vote for obama. I’ll pass

[Orange1998]

Any and all laws to protect investors were ignored. The Govt did want they wanted.