GM Is The Same GM It Was Yesterday: IPO Adds 30% More Shares.

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GM has increased the price per share of its IPO from about $26 to nearly $33 and ratcheted up the number of shares it will offer  by 30% to 478 million shares, all in the course of two days. GM also says it will up the number of preferred shares it will offer

GM is the same company that it was a day ago, a week ago, and probably a month ago. GM has lost market share in the US for most of the last decade and that share is now about 20%. The stock of Ford Motor (NYSE: F), GM’s most fearsome rival, has stayed steady at about $16.50 for the last five days. The share prices of Japanese rivals Toyota Motor (NYSE: TM) and Honda (NYSE: HMC) have also been essentially flat. So, the higher demand for GM shares really has no discernible foundation.

GM’s future in Europe is probably only modest. Vauxhall and Opel sit in a large pack of at least a dozen other powerful brands. The same is true in Latin America. GM’s great promise is in China, where it holds the market share lead with VW. But, that is as it has been for more than a year. The auto growth numbers from the People’s Republic are released each month so there are no secrets about GM China.

There was a question of whether GM’s shares were priced too high before it raised the amount and size of it IPO. The increases are in reaction to demand, which is as it should be. But, demand will really be tested post-IPO and GM will have to weather that period like any other company which has gone through an initial public offering. As many firms have found out, an IPO is a chance for some holders to cash out, and many IPOs end up below their offering price at the end of their first day of trading.

But, those who search for a new GM to justify a higher market valuation won’t find one.

Douglas A. McIntyre

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