Could the taxpayer end up doing OK on its controversial investment in automaker GM?
The restructured company’s IPO is in process, and should GM shares achieve a price of $134 per share then the taxpayer will break even according to the special inspector general of the government’s bailout programs.
Unfortunately the shares have never hit such a high level before, reports the Washington Post:
The price needed for a full recovery of the U.S. investment is far higher than shares of the automaker have ever reached, and some analysts and government officials have expressed doubts that the United States will be able to recover the money.
Yet some believe that the new restructured GM is a whole new animal, and $134 per share would be easy to achieve.
Last week, in fact, Morningstar analyst David Whiston issued a preliminary estimate setting the shares’ fair value at $134.
“GM’s cost structure is drastically improved,” Whiston wrote in a Sept. 13 note to investors. “We think GM’s earning potential is excellent because it finally has a healthy North American unit and can focus its marketing efforts on just four brands instead of eight. . . . We think it is critical for investors to know that GM now makes excellent car models as well as light trucks.”
Note however that when the GM IPO happens, the company’s shares will likely be split ahead of time into smaller pieces, in order to provide a lower per-share price and attract retail investors. We weren’t big fans of the bailout, but let’s see how the IPO goes.