GM: The Smart Move?

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Posted: Dec 02, 2010 12:01 AM
GM: The Smart Move?

Wow.

A year ago, who would have thought that after bankruptcy and corporate restructuring, that General Motors would IPO at an astounding $20 Billion?

Not me – and I come from a Chevy family!

While I wanted to see this American auto icon make a comeback, I wasn’t counting on this.

Right now, GM’s the talk of the town…

And rightfully so, but should they be?

Sure, a $20 Billion IPO is impressive, but there is an even more pressing question that needs to be answered, and that is…

Is it the smart play for investors?

I don’t think so, and here’s why…

While this IPO is making headlines now, I’m afraid it will also be in the headlines come 3 months from now when the preferred stock shareholders begin to sell their shares at a breakneck speed.

Where are shares headed then?

Does the term “drop like a rock” mean anything to you?

What we have going on here is a shorter’s paradise, and I wouldn’t be surprised to see shares drop half of their value, if not more when this happens.

It’s part of the problem when you IPO so high…

If you wanted to make the smart move in the auto industry, you should take a look at Ford (F).

Ford didn’t take a dime from Uncle Sam during the recession…

Ford is much more profitable than GM…

And the kicker is, they’re priced at almost half the price!

Think about it…

You can buy shares of a proven performer in Ford (F), or really, take a chance on an overpriced question mark like GM…

Which sounds like the safer, sounder move?

I know my grandfather is looking down on me right now and shaking his head for sounding like a Ford guy, but the truth is, he would have been sad to see what had come of the company that he helped build.

Here’s the thing…

I hope I’m wrong. My grandfather’s pension is what allows my grandmother to live off more than just social security and savings, so if there’s anybody rooting for GM to shine – it’s me.

So today is a victory for GM, and I applaud their efforts, but they need to keep their eye on the prize.

Because at one point, the Confederacy was beating the tail off the Union during the Civil War – until Gettysburg.

After that, the war was all but over...

So a single victory doesn’t guarantee total domination.