More evidence that the GM IPO is being hurried for political purposes is found in the IPO registration filing yesterday. The company cannot assure the accuracy of its financial information because of weaknesses in its internal controls. How can GM offer and price shares if it cannot even attest to its own financials?
The shares being offered for sale will come from the U.S. government and the United Auto Workers (UAW) trust fund, another red flag. If the UAW has such great confidence in the future of the company, why is it selling? Is it to cash in on the superficial media accounts of GM’s “progress,” when it knows the long-term future of the company is less rosy?
Few shares will initially go to retail investors. Instead they will go to hedge funds and professional investors who have no long-term interest in GM. They seek to flip the shares for a profit. Although there is nothing inherently wrong with speculation, the circumstances of this offering create an unholy confluence of interests. The administration wants to have an offering before the elections, the UAW wants to dump shares, and Wall Street is ready to capitalize on the White House-induced hype, no matter what happens following the elections.
The offering is expected to raise between $10 and $15 billion. GM’s unfunded pension liabilities alone are $27 billion. This company has a long, long way to go to become viable. Reports of GM’s “comeback” are premature.
Is the GM IPO also a pay back to Wall Street banks that stand to make millions in fees? The offering could be done more cheaply by the Treasury. Obama’s verbal assault on Wall Street bankers has been conducted with a wink. Almost uniformly, bank executives supported Obama’s presidential campaign. Is the IPO a consolation for enduring Obama’s demagogic, but politically necessary, attacks?
GM’s Stagemanaged IPO (Investor’s Business Daily)