By John Clark
The expectation is growing that General Motors will soon be able to sell its stock to the public again, according to an article in the Detroit Free Press. This news could signify that taxpayers will be able to get back their investment in the previously troubled automobile company.
This news comes as GM reported that it made $865 million in the first three months of 2010. This represented the company’s first profitable quarter since 2007.
The news also means that GM has taken a significant step forward following its recent emergence from bankruptcy reorganization.
“It was an extremely good first quarter for General Motors,” said Chief Financial Officer Chris Liddell. “Posting a profit and generating positive cash flows are important steps as we work to rebuild General Motors.”
Despite growing speculation and potential excitement, Liddell did attempt to temper expectations about the public stock offering. According to the Detroit Free-Press, however, it is apparent that there are efforts being made “behind the scenes” on the part of GM to get ready for a public stock offering.
“I’m in the usual position of probably just trying to keep people’s expectations low on this topic,” said Liddell. He did say that the company could go public in 2011, or by the end of 2010. This was in line with previous statements that he had made on the subject.
According to an industry analyst, banks are also preparing to make a move if stock is offered to public. The U.S. Treasury, according to sources, has been researching a deal, including conducting interviews with investment bankers for their insight. Compared with last year during the same time period, GM announced, the company’s revenue rose by 40 percent. After expenses and capital expenditures, the Michigan-based company also generated $1 billion in cash.
The milestone of profitability is considered a crucial one preceding a public offering of stock. Nonetheless, CFO Liddell has not specified exactly when the company will go public again. “The IPO will happen when the market is ready and the company is ready.” He admitted, though, that “there is a lot of excitement building.”
The major issue for the IPO could be, as Liddell mentioned, the market itself, which is out of GM’s control. The turmoil over Europe's currency and markets across the globe has caused the U.S. stock market to fluctuate recently, which may lessen GM’s urge to get involved.
One source, corporate restructuring expert Van Conway, told the Free-Press that while right now the IPO market could be favorable for GM, which he called “a good company,” he noted that trouble could arise if the stock market were to dive even further.
GM executives had given some signs that the business was improving before the report came out, and those were confirmed with the release. The recent report about GM’s profitability is the first good look that many have had at GM operations since its emergence after filing bankruptcy in July of 2009. The report has many optimistic for the rest of the year.
Of the outlook for the year, Liddell said, “There’s no reason to say that we shouldn’t be pushing for profitability in North America on a consistent, sustained basis. The first quarter heartens me that we’re on the right track.”