{"id":15574,"date":"2010-11-18T13:59:01","date_gmt":"2010-11-18T18:59:01","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=15574"},"modified":"2010-11-18T13:59:01","modified_gmt":"2010-11-18T18:59:01","slug":"how-to-play-the-general-motors-ipo-without-playing-general-motors","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/11\/18\/how-to-play-the-general-motors-ipo-without-playing-general-motors\/","title":{"rendered":"How to Play the General Motors IPO… Without Playing General Motors"},"content":{"rendered":"

By Sara Nunnally, Editor, Smart Investing Daily, taipanpublishinggroup.com<\/a><\/strong><\/span><\/p>\n

Yesterday, General Motors was resurrected in a more than $20.1 billion IPO.<\/p>\n

In its 100 years of existence, General Motors has been at one point the most successful company in the world, and the biggest bankruptcy in the auto industry. Now it could have the distinction of being the biggest IPO in U.S. history<\/a>…<\/p>\n

As a result, General Motors priced at the top of its range at $33 a share, and was six times oversubscribed. This is great news for the company, as government ownership will drop from 61% to 26%.<\/p>\n

Does this mean you should buy General Motors, which will have the same ticker symbol — GM — as before the bankruptcy?<\/p>\n

Maybe not…<\/p>\n

The government is still taking a hit on this deal. Consider this from Bloomberg:<\/p>\n

The offering brings Chief Executive Officer Dan Akerson closer to his goal of returning the $49.5 billion GM received in a taxpayer bailout last year. The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb more than 60 percent.<\/em><\/p>\n

In fact, the U.S. Treasury Department needed General Motor shares to IPO at $43.67 to break even from the get-go. But here’s the thing: The government agreed to a six-month lock-up on what’s left of its stake, which means it won’t be able to sell its shares until then.<\/p>\n

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Tim Leuliette, a director at Visteon Corp., at the Reuters Autos Summit<\/a> said, “You’re not in GM for a three-month investment. You’re into GM because a critical element, a critical building block of the U.S. economy, has significantly repositioned itself to be competitive.”<\/p>\n

General Motor’s success this year — the first year that the company’s expected to show a full-year profit since 2004 — will mostly be due to cutting costs and growth in China.<\/p>\n

GM may have restructured, but it still needs a robust U.S. economy to gain real traction.<\/p>\n

Perhaps a better way to play the GM IPO is not to play GM at all, but to play GM’s new trend of efficiency and alternative vehicles. Indeed, GM’s partner in China, SAIC Motor Corp., might invest between $500 million and $1 billion in GM and talk about electric car programs.<\/p>\n

And here in the States, GM is releasing the new Chevy Volt.<\/p>\n

The new Chevy Volt will have a line of lithium-ion batteries running down the middle of the car… Very much like a heart pumping power. These batteries will be made by South Korean company LG Chem.<\/p>\n

(By the way, investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the market with our easy-to-understand articles<\/a>.)<\/em><\/p>\n

According to GM, it would cost about $1.50 to “fill up” the new Chevy Volt every night. The Volt can run on battery power for up to 40 miles. Now that may sound really short, but here’s the thing — the Volt has a small gasoline engine that can recharge the battery so that you can get another 300 miles before you need to recharge and refill your tank.<\/p>\n

The way to play the GM IPO could actually be to play the hybrid car market.<\/p>\n

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