GM’s “skimpy” first day bump …

First, I’m not a big fan of the GM bailout. 

That view seems contrarian the week after the big IPO.

My reasoning: Remember the Iacocca-led Chrysler bailout.  It was hailed as saving the company.  Well, it saved it from death, but the company never did catch real traction. Even Mercedes couldn’t make it work … and it ended up getting bailed out again.

My take: any company can look good for awhile if you wipe out its shareholders and secured debt holders.

But eventually, the structural factors kick back in (e.g. the UAW albatross) and the rocks start popping through the water again..

Just watch.

Now, about the IPO …

Sean McAlinden of the Center for Automotive Research told NPR that investors may want to ask the new GM: “By the way, the last set of shareholders and bondholders you had, you totally screwed them. So why should I trust you now on nine months’ worth of results?”

Bottom line, the net effect of the bailout and IPO is the transfer of ownership from GM’s old investor base (millions of widows, orphans, and retirees), to a bunch of bailed out banks and sovereign funds…  many of whom whom probably flipped their shares in the first day trading.

The good news is that the new transient owners didn’t make as much flip money as they might have expected.

Here are the facts:

In their first day of trading Thursday, GM shares opened at $35, two dollars above the price investors paid for them in the company’s initial public offering Wednesday.

In trading, they climbed to as high as $35.99 before closing at $34.19.

The first-day price gain of 3.6% over the IPO price was far below the 9.7% average for the previous 10 largest U.S. IPOs, according to Thomson Reuters, which tracks new issues. And the small gain came as the overall stock market rose broadly.

The skimpy price rise appeared to have reflected the U.S. Treasury’s push to boost the IPO price of the shares this week from an initial range of $26 to $29 a share to $32 to $33 a share, and the decision to increase the size of the sale from 365 million shares to 478 million, with an option to sell as many as 550 million.

WSJ, Wall Street Payday for a New GM, Nov.19, 2010.

If true, I say kudos to the Treasury Dept on this on.

I’ve always scratched my head over big first day IPO pops. 

To me, they always seemed to reflect mis-pricing of issues and a big opportunity loss to the company issuing the stock.  Rather then the companies capturing the full value of the IPO, the flippers get rich.

In this case, the company got pretty much full value.  I think that’s a good thing.

One more rub: I heard that the Treasury’s shares are locked up for 6 months.

My bet: GM will be trading in the high teens, low 20s next May … oops.

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