By Sara Nunnally, Editor, Smart Investing Daily, taipanpublishinggroup.com
Yesterday, General Motors was resurrected in a more than $20.1 billion IPO.
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…
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%.
Does this mean you should buy General Motors, which will have the same ticker symbol — GM — as before the bankruptcy?
Maybe not…
The government is still taking a hit on this deal. Consider this from Bloomberg:
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.
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.
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Tim Leuliette, a director at Visteon Corp., at the Reuters Autos Summit 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.”
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.
GM may have restructured, but it still needs a robust U.S. economy to gain real traction.
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.
And here in the States, GM is releasing the new Chevy Volt.
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.
(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.)
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.
The way to play the GM IPO could actually be to play the hybrid car market.
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EV World and Freedonia Group estimate that battery demand will jump to $22.8 billion a year by 2012. The main components of batteries are metals, chemicals and polymers. And while nickel metal hydride batteries currently hold the lion’s share of the market, lithium ion batteries are proving to be the more efficient and powerful type of battery, and they are gaining in popularity as we’ve seen with the Chevy Volt and other electric vehicles like the Nissan Leaf.
You can access this market three ways:
Green power metals are metals like lithium, nickel and platinum, and they play key roles in power generation and efficiency. As the automotive market trends toward higher fuel efficiency standards and new power options, like plug-in hybrid technology, these metals applications are going to be in high demand.
We’ve put together a free video of just how these green power metals are going to help reform the auto industry — GM included. You can view the Green Power Metals: How to Cash In on the Clean Energy Future video here.
After the video, you’ll get access to our free report highlighting two green power metal solutions.
With GM IPOing and on its way to its first profitable year in six years, this report is a must-read for access to the world of hybrid technology and electric vehicles market.
About the Author
Sara is Co-Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country.
As Senior Research Director, global correspondent and co-editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.