Ed Butowsky, managing partner of Chapwood Investment Management, joins Varney & Co to discuss the return of GM to the NYSE and how investors should and will react.
As General Motors makes its relaunch into the NYSE investors should be paying close attention at its offering. The stock debuted today at a little over $33 per share. This is significantly higher since right before filing bankruptcy.
While all the pomp and circumstance is rolled out for the relaunch of GM stock trading in the NYSE is it all a little premature celebration? Ed Butowsky examines this activity and believes that this is truly premature. Ed explains that the true celebration should come after GM has paid back the $12-$13 billion in bailout money they owe the American people.
With GM’s stock rollout on the exchange investors should be cautious no matter how hot the deal is right now, even though this is a great mechanism to get GM to payback the bailout. Furthermore, Ed explains that the car industry has not yet recovered and because of that the auto industry has not shown the clarity needed to evaluate future quarters to establish confidence in the market. The true impact of the bailout, good or bad, will only start to show up in the next 3-5 years. Ultimately GM’s stock needs to hit around $53 a share to start to see the payback for the bailout money GM received. While Ed is excited to see GMs return to the exchange and the ability to use the stock trading as a mechanism to measure payback to taxpayers, this event surely has not shadowed the unknown factors that could still turn this the other way. Ed Butowsky expresses that investors have to dig a little deeper and take a hard look at how GM is doing in post-recession era.
As GM announced the IPO back in August, the buzz started flying. It was not until Wednesday, November 17th, that the value was released. At $32+ a share of course there was a huge shockwave. However, these options for the IPO were not offered up to the taxpayers who own 60% of GM. These options for the IPO were offered up to institutional investors and overseas investors like China. If the ordinary taxpayer would have been offered would they partake in this? Ed explains the taxpayers are not very happy because 15%+ went to China. Why not offer it up to the very people who invested the money to bail them out. Overall, the automotive industry is a tough one to try to make money on especially with various labor issues and rising cost of oil.
As the media and others begin to dissect these events culminating in such fashion with the relaunch into the market, investors and economist worldwide of all types will be seeing this at face value as a success story and possibly as rationale for future bailouts. Ed opposes such conclusions as he believes in a free market; however to the investment class, wealthy investors, institutional investors they will see things at face value. Ed explains and encourages investors of all types that the true impact is found by digging a little deeper and taking a hard look at how GM, in this situation, is doing in post-recession era. Ed points out that everyone needs to remember that there are still $12-$13 billion left unaccounted for that was used to bailout GM. As much as the public will argue that perception is reality, Ed argues that the facts speak louder than words and certainly need to be taken as a warning.
Tags: bailout, fox business, general motors, gm, nyse, recession, stock, stock exchange
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