NEW YORK - Shareholders cheered the public offering of GM but did the shareholders pay a premium to buy an iconic name. GM is returning back to the market with $8 billion of debt, and $11 billion of preferred share debt. Preferred share debt is more attractive for a company because it can be held in arrears. GM continues to have significant post-retirement and pension obligations. Currently the company still has $36 billion of these related liabilities.
Investors cheered the high IPO price, but this does nothing for the actual company. If GM were to issue shares for $33 a share its capital position would be greatly improved but since the government held these shares before hand the shares essentially switched pockets. Despite the improvement of the nightmarish -$100 billion of tangible equity seen in early 2009. The company still has -$28 billion of common shareholder equity. The difference is now the company is profitable.
Despite not going into bankruptcy it appears that Ford is still financially stronger then the new and improved GM.
To see the full GM report click here.
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