GM prices IPO as stocks regain bearings

General Motors sells its IPO at $33 a share. The Dow falls 16 points, but the S&P 500 and Nasdaq manage small gains. Target forecasts strong holiday sales.

By Charley Blaine Nov 17, 2010 2:57PM

Updated:Charley Blaine 11:30 p.m. ET

 

You could be forgiven if you thought Tuesday's big stock market drubbing was the beginning of the end of the world. Today, the market was flat. Let's put a nicer word on it: stable.

There was cheer after the close.  General Motors (GM) priced its initial public offering at $33 a share -- at the top end of its range. Some 478 million shares will start trading on Thursday. And, with a $4.4 billion sale of preferred shares, the IPO raised $20.1 billion today, the most ever for a U.S.IPO.


The prospect that GM would price at $33 helped Ford Motor (F) shares rise 1% to $16.68 in regular trading and an additional 1.4% to $16.91 after hours. The stock briefly hit as high as $17.42 on Tuesday.

In addition, technology shares were higher.  So were metals stocks, thanks to higher copper and silver prices. Gold was down slightly.

The Dow Jones industrials ($INDU) closed down 16 points to 11,008. The Standard & Poor's 500 Index ($INX) was up slightly to 1,179. The Nasdaq Composite Index ($COMPX) added 6 points to 2,476.


Futures trading suggests stocks will open higher, thanks in part to GM. Another catalyst: The dollar was lower in overnight trading. Stocks have typically moved higher on a falling dollar.

The good news on the close was twofold:

  • The Dow held above 11,000 again.
  • The S&P 500 held above 1,177, an important support level.

Crude oil settled down $1.90 to $80.44 a barrel. Gold settled down $1.50 to $1,336.90 an ounce and is down 2.1% this month. Interest rates were flat, with the 10-year Treasury yield up slightly 2.864% from 2.847% on Tuesday. The dollar was flat against major currencies. 


Ross Stores (ROST), Salesforce.com (CRM), Sears Holdings (SHLD) and Staples (SPLS) are the biggest earnings reports due Thursday.


The big economic reports are the weekly report on initial jobless claims, the Conference Board's Index of Leading Economic Indicators and the Philadelphia Federal Reserve Bank's monthly reading on manufacturing in its region.


$33 a share for GM
Thanks to big demand, GM was able to boost the size of its IPO and get a better price.

The offering started with 478 million shares that were sold for $15.8 billion and $4.4 billion in preferrred stocks


It was expected that an additional 72 million common shares will be made available in a so-called "greenshoe" or "overallotment" in the next few days. Plus, another $650 million in preferred stock, with a 4.75% dividend also may be sold.


That would raise the total capital raised to more than $23 billion, the largest IPO ever, The Wall Street Journal noted.


Proceeds from the sale largely will go to the U.S. government, which owns 61% of GM after restructuring the car maker last year in bankruptcy court. The United Auto Workers and the government of Canada will get the rest.


Energy prices -- New York close
 

Wed.

Tues.

Month chg.

YTD chg.
Crude oil 

$80.44

$82.34

-1.22%

1.36%
(per barrel)











Heating oil

$2.2519

$2.3090

0.63%

6.44%
(per gallon)











Natural gas 

$4.0300

$3.8180

-0.20%

-27.67%
(per mil. BTU)











Unleaded gasoline

$2.1579

$2.1557

4.78%

5.11%
(per gallon)











Retail gasoline

$2.8920

$2.8930

2.95%

9.59%
(per gallon; AAA)












Weakness in Asia doesn't bother other markets
Helping the market today: European stocks were higher as  financial leaders struggle to find a way to help Ireland get through the latest debt crisis.

There was continued stress in Asian stock markets, with 2% declines in Shanghai, Hong Kong and Mumbai, but the selling did not carry through to Europe and beyond. Germany's Dax Index ($DE:DAX) added 0.6% to 6,700. Britain's FTSE-100 Index ($GB:UKX) rose 0.2% to 5,693.

Where there's weakness, the losses aren't huge. The laggard among the 30 Dow stocks -- Home Depot (HD) -- was off 2.8% to $30.83, subtracting about six points from the blue-chip index.

Seventeen Dow stocks were lower, unlike Tuesday when 28 stocks were down. In addition, 75 Nasdaq-100 ($NDX.X) stocks were higher. The index, which tracks the largest Nasdaq stocks, was up 16 points to 2,110.

Target and BJ's help shares
Helping the market were good earnings from Target (TGT) and BJ's Wholesale (BJ) and a benign Consumer Price Index report.

Excluding a tax gain, Target earned 68 cents a share in its fiscal third quarter, in line with Street estimates. Moreover, the company expects its best holiday shopping season in three years. Shares were up 3.9% to $55.62.

BJ's Wholesale shares were up 3% to $47.54 after the company beat profit estimates and increased its year-end earnings guidance by 2 cents to $2.48 to $2.52 a share. Wall Street has been expecting a full-year profit of $2.45 a share.

In addition, Chico’s FAS (CHS) rose 10.5% to $11.13. The women’s clothing retailer reported third-quarter earnings of 16 cents per share, beating the average analyst estimate by a penny. Sales of $483 million beat the Street estimate of $476.6 million.

Shares of GlaxoSmithKline (GSK) rose 2.7% to $39.57 after a key panel approved a lupus treatment the company is developing with Human Genome Sciences (HGSI), bringing it closer to gaining approval from the Food and Drug Administration. Human Genome’s shares, however, were down 5.3% to $24.51.

Hope for Ireland?
There's vague hope that a solution to the Irish problem can be worked out. Britain is now involved. The European Union is pressing the Irish to accept a bailout package.

Ireland's problem is that its government has borrowed huge amounts of money trying to keep its banks afloat.

At the same time, Irish banks are significant lenders to Britain's housing market. British banks are big lenders to Irish companies. Britain exports more to Ireland than to China, India, Brazil and Russia combined.

The big question is whether the solution -- the classical cut-spending-and-raise-taxes program -- will win at least acceptance from Irish voters.

The great worry is that the problem will spread and drag in Portugal and Spain. And possibly destroy the European Union in the process.

Short hits from the markets -- New York close
 
  Wed.

Tues.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.140%

0.140%

16.67%

180.00%
5-year Treasury note 

1.457%

1.467%

23.58%

-45.76%
10-year Treasury note

2.862%

2.847%

9.57%

-25.53%
30-year Treasury bond

4.276%

4.257%

6.90%

-7.86%
Currencies







 

 
U.S. Dollar Index

79.210

79.333

2.26%

1.27%
British pound

$1.5906

$1.5886

-0.92%

-1.67%
(in U.S. $)











U.S. $ in pounds

£0.6287

£0.6295

0.93%

1.70%
Euro in dollars

$1.3528

$1.3488

-3.11%

-5.61%
(in U.S. $)











U.S. $ in euros

€ 0.7392

€ 0.7414

3.21%

5.95%
U.S. $ in yen 

83.40

83.36

3.09%

-10.32%
U.S. $ in Chinese

6.67

6.64

-0.37%

-2.29%
yuan











Canada dollar

$0.976

$0.979

-0.71%

2.61%
(in U.S. $)











U.S. dollar 

$1.026

$1.021

0.72%

-2.54%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,336.90

$1,338.40

-1.52%

21.96%
(per troy ounce)











Copper

$3.7295

$3.7275

-0.11%

11.44%
(per pound)











Silver

$25.5110

$25.2330

3.86%

51.45%
(per troy ounce)











Wheat 

$6.3250

$6.2625

-11.82%

16.81%
(per bushel)











Corn

$5.2575

$5.2650

-9.66%

26.84%
(per bushel)











Crude oil 

$80.44

$82.34

-1.22%

1.36%
(per barrel)










 

16Comments
Nov 17, 2010 6:08PM
avatar
What a joke, $33/Share when I had to sell all of my GM for .55/share last year and I get no rights as a prior stockholder.   Default on your loan, over compensate your employees, forget your pension obligations and start over with no apology to the people who owned the company, no operational integrity, no commitment.  Lets just forgive and forget the masses who held the worthless paper and start over....   Even in monopoly you go directly to jail and do not collect $200 (ah... but this is not a game)...  Sell at $33 and I hope the world sees it drop significantly to prove the point. 
Nov 17, 2010 5:54PM
avatar

I'll consider owning a GM product again, when my GM bonds are worth full value.  Until then I view it like this.  I wrote the mortgage on GM's house.  They defaulted, the court allowed them to keep the house free and clear, and now they want to sell the house...

 

I cannot reward a thief...

 

 

avatar

Do not aid Obama/UAW/chrysler/G.M. in sidestepping the bankruptcy laws (these will come back to force another Pres to grant immunity to Obama).

 

They deserved to "reap what the sowed", but instead they got rewarded for failure and a distorted and fully wrong approach to business.

 

I will never own a G.M. vehicle or stock again!

Nov 17, 2010 5:52PM
avatar

Let me see if I got this straight.  The tax payer's bailout GM, GM file bankruptcy and restructures.  Now it makes a profit and is set to IPO; making money from the public to payback the tax payer?

 

Is this an eleborate ponzi scheme?

Nov 17, 2010 6:26PM
avatar

The initial IPO is usually overpriced, I think I'll wait until it drops to $5.00.

Nov 18, 2010 12:14AM
avatar
Hmm, GM stiffs all the old shareholders whose stock went to ZERO.   All the GM bondholders----DITTO.   Many suppliers and all vendors GM owed money to were never paid.  And, to top it all off, we--US taxpayers--give that Company $50 billion.   And.......why?  To buy UNION votes and to save a few jobs in that industry?  This Company has 70% of its sales in other Countries and now manufactures more cars in other Countries using non US employees of course.  I can understand why Americans are angry at GM.  I know I would be.  I'll never buy one of their cars.
Nov 17, 2010 10:49PM
avatar

I will never buy another GM product.  Lost all my money in their stock....and now I have nothing.

 

avatar
GM isnt that supposed to be The heartbeat Beat of America. But where the little guy cant buy shares of stock because he's not good enough but they expect him to buy there Da* cars and trucks which are overpriced His money's good enough there though. Give me a break for thirty yrs. i been buying there cars and trucks but when stocks are offered im not rich enough to buy there stock????????? Why??????????????????????????????????
Nov 17, 2010 3:36PM
avatar

Never heard of GM,.... is that a new company? Hmmm.... I don't know if I should invest? I have a bad feeling that this company just might go bankrupt. Confused

Nov 18, 2010 2:47PM
avatar
So we screwed the GM Stock Holders, Screwed the American Taxpayer, and Now we are Screwing the Chinese who may buy this Stock! Ya gotta love a great con game. Bernie Madoff could never touch this ponzie scheme. Political payback is the Government motive here. GM is a Total failure. The government prop up of this economic flop only lends itself to screwing those ignorant enough to dive back into this swamp looking for the elusive Stock Gain.
Nov 18, 2010 12:22PM
avatar

They sucker eveyone into buyin the stock and then

BOOM the stock goes down. Just another way

to legally seal money. PONZIE ON WALLSTREET

Nov 18, 2010 12:00PM
avatar

Why don't we tax wallstreet activity?

 

10% for every dollar traded everyday with

5% for national health care funding and

5% for Social Security and Medicare.

 

Alot of money that the government can get for

the people.

Nov 17, 2010 7:48PM
avatar

Active,

 

My internet has been up and down. Anyway, I caught you comment the other day.

 I have sold some of my PMs and shorted the bond  market. I bought TBT about 20 Oct, up abut 11% since then.

I have about 6% in TBT, don't think I will increase  it in the short term.

Nov 17, 2010 6:57PM
avatar

The Return of the Titanic, part 2,

Starring: Jim Cramer

Nov 17, 2010 4:14PM
avatar

Yup.......It's a NEW company,get it while it's hot.

Or get Ford (F).

I'm hoping it won't collapse after Thursday.

And be selling for $28-30 next week.

We'll see.

Nov 17, 2010 5:11PM
avatar

BUY GM VEHICLES AND THE STOCK! THEY ARE BACK AND STRONGER THAN EVER....

ITS ABOUT TIME WE START SELLING OUR PRODUCTS TO THE CHINESE.

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