October 2, 2010

MICKEY KAUS: Will GM’s Big IPO Actually Happen?

GM is currently planning an IPO designed to allow taxpayers to sell at least some of their 61 percent stake in the bailed-out giant. The IPO is one of the things that lets the Obama administration claim the bailout was an “unambiguous success,” in the words of former auto mini-czar Steven Rattner.

But isn’t it looking increasingly like the IPO is in trouble? I’m not a Wall Street expert, but I can read the papers. The IPO’s already been scaled back, apparently, to the point where taxpayers may not unload enough shares to put them under the 50 percent mark. The global economy is iffy. GM has just abruptly switched CEOs . Its balance sheet is “loaded with fluff,” according to Bloomberg. Its own IPO documents admit its “internal control over financial reporting are currently not effective.” UAW locals are restive. And its market share is now seemingly below the target level. (A percentage point of share is a big deal in the auto industry.)

I smell Kabuki! Here’s the increasingly plausible scenario: The IPO was conveniently scheduled for after the November elections because the White House knew there was a good chance it wouldn’t fly. Now they know that with more certainty. But until November 3, the prospect of the big fall sale allows Obama to portray the bailout as on track, minimizing voter disapproval of one of his most unpopular actions.

Wouldn’t surprise me.

UPDATE: Jim Bennett wonders about a government “pump and dump” operation:

I have been wondering about this for a while. The USG could easily make some moves that would spike GM stock up temporarily, so the administration could dump it on the good news. “It’s not illegal if the President does it”, as another President once said. The really interesting question s whether the UAW would be allowed to dump their stock, giving them a huge war chest they could spend in 2012. Know anything about whether the UAW is free to sell its stock in the IPO?

I don’t. Anybody out there know? But regardless, I believe that there will be fertile fields for various securities-law prosecutions stemming from events of the past couple of years, if any authorities care to pursue them. And perhaps some civil actions, even if they don’t.

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