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EternalHoH -> RE: Obama to Sell GM Stock to China After Election (10/27/2010 6:59:05 PM)
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quote:
ORIGINAL: DarkSteven
I'm absolutely lost. GM is one of the first public corporations ever, and sold stock for decades. How can they have an IPO if they're already listed on the NYSE?
The old GM is now known as Motors Liquidation Co. That GM exists only to settle up claims. The actual operating company is owned by the government, and that is what will be IPO'd (re-privatized) and re-listed on the exchanges.
Getting $8 to $10 billion back on a $50 billion taxpayer infusion (~ 18% recovery ) is not as good compared to what the government made back on the railroads when the government took them over back in the 1970s. In fact, the relative success of the railroad takeover is what they used as a pattern for the GM takeover.
In the 1970s, all the railroads in the northeast were in bankruptcy. As a national defense issue, fearing the military would be unable to transport military equipment in the advent of war, the government took over those seven railroads just like it took over GM. The initial money came from the DoD, and it was supplemented later with annual budget appropriations. The government spent a total of $3.3 billion to rebuild and replace equipment, sell off unnecessary properties, and streamline the company. The government-owned railroad made its first profit in 1984, and was re-privatized via IPO in 1987. That IPO netted the government $1.9 billion back on its $3.3 billion investment (~ 58% recovery for the taxpayer). At its annual profit levels, had the government held ownership for 4 more years, it would have made back 100% of the taxpayer's money, but in 1987 Reagan was in his second term and was up against term limits, so he pushed to get the government out of the railroad business while a Republican was still in office. The taxpayer took the $1.4 billion loss only due to Reagan's "fire sale" driven by the Republican desire to separate government from private industry as soon as possible. The investors who bought the railroad from the government for $1.9 billion in 1987 turned around and sold it in 1999 for $10 billion.
GM was patterned after this relatively successful takeover experience. As for the pundit alarmists doing their chicken little act claiming GM was the first watershed government incursion into the affairs of private business, I guess they don't know their history. The railroad takeover and re-IPO also didn't happen in the age of the internet and 24 hr cable news with its viral stupidity, either.
GM is turning out to be a bit of a fire sale, too. All the viral beatings over socialism that Obama is taking re: the upcoming elections, combined with other more pressing issues, is driving the early exit at a greater loss for the taxpayer. You need a profitable company and time to recover the taxpayer investment. I just hope the taxpayer understands that the tea-driven issues are turning out to be rather costly for the nation.
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