GM shares will trade for the first time since they went bankrupt

Marketplace Staff Nov 18, 2010

GM shares will trade for the first time since they went bankrupt

Marketplace Staff Nov 18, 2010


JEREMY HOBSON: A little later this morning shares of General Motors will trade for the first time since the car-maker went bankrupt in June of last year. GM is making its Initial Public Offering which is expected to be the second largest IPO ever.

Marketplace’s Stacey Vanek Smith is with me here in New York with more. Good morning Stacey.

VANEK-SMITH: Good morning.

HOBSON: So we’ve been talking about potential strong investor reaction to this IPO. How is it shaking out?

VANEK-SMITH: It’s been pretty impressive. GM shares were sold yesterday for $33 each. That’s almost $10 more per share than analysts were predicting. Today shares start trading and GM share price is expected to go up even more. I spoke with David Cole, with the Center for Automotive Research about why there’s so much hype.

DAVID COLE: What really is important to investors is projected future earnings. And when you see the current earnings with a very tough, still, economy, it tells you if things improve, this is going to be a very profitable company.

GM just recently posted its first profit in more than 6 years.

HOBSON: Yeah, it’s been quite a transformation for that company, which was asking for bailout money just over a year ago. Is this new GM really that much better than the old one?

VANEK-SMITH: I put that question to Robert Shultz with Standard and Poors Corporate Rating. He said bankruptcy allowed GM to get rid of billions in debt. Especially those so called legacy costs, which were links like retirement benefits and healthcare.

ROBERT SHULTZ: They’re not under the sort of pressure they historically were to produce vehicle just to cover these large fixed costs that they had — lot of employees, a lot of plants. That should help their competitive position.

HOBSON: OK now Stacey, the big question: will GM be able to pay the government back, and finally shed that nickname Government Motors?

VANEK-SMITH: Well, that’s another story. GM’s stock price would still have to go up by more than a third for the government to get it’s money back.

HOBSON: Stacey Vanek Smith here in New York, thanks.

VANEK-SMITH: Thank you.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.