General Motors (GM)(MTLQQ) is One Lean, Mean, Potential-Earnings Machine - Barron's
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According to an article in Barron's today, General Motors (NYSE: GM)(OTCBB: MTLQQ) could be the hottest IPO in 2010.
The automaker has undergone somewhat of a South Beach or Atkins diet over the past year or so after emerging from bankruptcy. The company has slimmed and trimmed their operations, and may be in the best shape its ever been since the 1960's.
The company may show an operating profit when it releases Q409 results later this month.
GM may make an IPO as early as H210, and could see a market cap of $50 billion, more than Ford's (NYSE: F) $40 billion and Daimler's (NYSE: DAI) $43 billion. Toyota (NYSE: TM) still dominates with a $127 billion market cap, and even their recent bad press won't diminish that too much.
The company has $42 billion in cash stored on its balance sheet, provided mostly by the U.S. bailout for the company to the tune of $50 billion. The $50 billion represents a 60.8% stake in the company. Canada has an 11.7% share, the UAW holds 17.5% and debt and other creditors now own 10% and warrants for an additional 15%.
Obviously a $50 billion market cap would help pay back the loaned funds, CEO Ed Whitacre says that $9 billion of debt will be repayed by June, and the U.S. stake will be worth $26 billion. UAW will see a potential 80% of $20 billion in health-care claims, and an additional $9 billion in debt and equity stock.
Investors that want to jump on the wagon early can purchase unconventional bonds at 30 cents on the dollar. The bonds don't pay interest and principal; they give holders equity in the company.
If you're not sure about diving head-first into GM, try Ford, Toytoa, or Diamler stock, which should react with the IPO and subsequent gains or losses. Investors should avoid Motors Liquidation (MTLQQ), as GM expresses a "strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios."
Hot models that allude to a sustained recovery include the Chevy Camaro, Cadillac CTS and SRX, and Buick LaCrosse.
GM's Vice Chair Bob Lutz recently made comments that some GM models are in short supply, and a pickup in demand could be a scary thing because they wouldn't be able to supply the vehicles.
GM also has a 15% market share of China, with its joint ventures. Buick's have now become a Chinese status symbol.
The first nine months of 2009 saw GM realize cost savings of $6 billion, and a workforce reduced by 18%. Pontiac and Saturn production has ceased, and Saab was sold off. Hummer is to be shut down, and GM is focusing on four major brands: Cadillac, GMC, Buick, and Chevy.
GM's Q409 results could show a decline in cash from $42 billion in Q309 to $32 billion, due in part to repayments. Net cash might be about $8 billion which is $34 billion minus $26 billion in debt and preferred stock.
An analyst from Evercore Partners has projections of $10 billion for FY11 cash flow, giving an overall valuation of $40 billion to the company.
This valuation doesn't include items like their 17% stake in GMAC, Chinese joint ventures, net cash value, and their ownership in Delphi. Barron's estimates that these holdings could easily top $10 billion themselves. They valuate GM at $50 billion, or about $85 per share with 590 million existing shares taken into consideration.
Bondholders, meanwhile, will be entitled to 50 million shares, 45 million seven-year warrants at $30 per share, and 45 million 10-year warrants at $55. There's no time line for when bondholders can convert into their shares and warrants.
J.P. Morgan says that the company's debt is attractive, with a current value of $8 billion, as the company could easily see FY11 cash flows of $11 billion or more in a stronger auto market.
The automaker has undergone somewhat of a South Beach or Atkins diet over the past year or so after emerging from bankruptcy. The company has slimmed and trimmed their operations, and may be in the best shape its ever been since the 1960's.
The company may show an operating profit when it releases Q409 results later this month.
GM may make an IPO as early as H210, and could see a market cap of $50 billion, more than Ford's (NYSE: F) $40 billion and Daimler's (NYSE: DAI) $43 billion. Toyota (NYSE: TM) still dominates with a $127 billion market cap, and even their recent bad press won't diminish that too much.
The company has $42 billion in cash stored on its balance sheet, provided mostly by the U.S. bailout for the company to the tune of $50 billion. The $50 billion represents a 60.8% stake in the company. Canada has an 11.7% share, the UAW holds 17.5% and debt and other creditors now own 10% and warrants for an additional 15%.
Obviously a $50 billion market cap would help pay back the loaned funds, CEO Ed Whitacre says that $9 billion of debt will be repayed by June, and the U.S. stake will be worth $26 billion. UAW will see a potential 80% of $20 billion in health-care claims, and an additional $9 billion in debt and equity stock.
Investors that want to jump on the wagon early can purchase unconventional bonds at 30 cents on the dollar. The bonds don't pay interest and principal; they give holders equity in the company.
If you're not sure about diving head-first into GM, try Ford, Toytoa, or Diamler stock, which should react with the IPO and subsequent gains or losses. Investors should avoid Motors Liquidation (MTLQQ), as GM expresses a "strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios."
Hot models that allude to a sustained recovery include the Chevy Camaro, Cadillac CTS and SRX, and Buick LaCrosse.
GM's Vice Chair Bob Lutz recently made comments that some GM models are in short supply, and a pickup in demand could be a scary thing because they wouldn't be able to supply the vehicles.
GM also has a 15% market share of China, with its joint ventures. Buick's have now become a Chinese status symbol.
The first nine months of 2009 saw GM realize cost savings of $6 billion, and a workforce reduced by 18%. Pontiac and Saturn production has ceased, and Saab was sold off. Hummer is to be shut down, and GM is focusing on four major brands: Cadillac, GMC, Buick, and Chevy.
GM's Q409 results could show a decline in cash from $42 billion in Q309 to $32 billion, due in part to repayments. Net cash might be about $8 billion which is $34 billion minus $26 billion in debt and preferred stock.
An analyst from Evercore Partners has projections of $10 billion for FY11 cash flow, giving an overall valuation of $40 billion to the company.
This valuation doesn't include items like their 17% stake in GMAC, Chinese joint ventures, net cash value, and their ownership in Delphi. Barron's estimates that these holdings could easily top $10 billion themselves. They valuate GM at $50 billion, or about $85 per share with 590 million existing shares taken into consideration.
Bondholders, meanwhile, will be entitled to 50 million shares, 45 million seven-year warrants at $30 per share, and 45 million 10-year warrants at $55. There's no time line for when bondholders can convert into their shares and warrants.
J.P. Morgan says that the company's debt is attractive, with a current value of $8 billion, as the company could easily see FY11 cash flows of $11 billion or more in a stronger auto market.
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