Author Topic: GM - General Motors  (Read 574580 times)

ander

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Re: GM - General Motors
« Reply #1660 on: May 07, 2019, 07:32:54 AM »
(Reuters) - General Motors Co's(GM) majority-owned Cruise self-driving division on Tuesday said T. Rowe Price and a group of existing investors put down $1.15 billion in new equity, valuing the unit at $19 billion.

The latest funding round includes General Motors(GM), Japan'sSoftBank Vision Fund and Honda Motor Co Ltd(HMC) , and should give the firm much needed cash as it aims to launch vehicles by the end of 2019.

The additional capital comes at a crucial time as a host of automakers and technology companies weigh how quickly autonomous vehicles can be marketed and sold in large volumes, and find ways to share rising costs for hardware and software development.

Rival Ford Motor Co is in talks with German automaker Volkswagen AG about joining forces to create autonomous vehicles in a deal that could involve an investment by VW in Argo AI, an autonomous vehicle technology company majority owned by Ford.

Cruise, which has secured capital commitments of $7.25 billion in the past year, was valued at $14.6 billion in the last funding round by Honda(HMC) in October, which had invested $2.75 billion.

The current valuation is equivalent to about 35 percent of GMís market capitalization despite no significant revenue and a product not ready for commercial launch.


(Reporting by Ankit Ajmera in Bengaluru; Editing by Bernard Orr)



roark33

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Re: GM - General Motors
« Reply #1661 on: May 07, 2019, 07:37:17 AM »
Everyone on this board probably makes fun of the valuation that Softbank is giving to some of these money burning pre-IPO companies, but if Softbank invests in a unit of GM, then that mark to market valuation gets 100% credit.  Something tells me, Cruise is worth nowhere near what Softbank is investing at. 

TwoCitiesCapital

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Re: GM - General Motors
« Reply #1662 on: May 07, 2019, 08:14:50 AM »
Everyone on this board probably makes fun of the valuation that Softbank is giving to some of these money burning pre-IPO companies, but if Softbank invests in a unit of GM, then that mark to market valuation gets 100% credit.  Something tells me, Cruise is worth nowhere near what Softbank is investing at.

True that it may not be worth the $19 billion, but the $7.5 billiom raised is real dollars that GM gets to spend that isn't its own. That's a real benefit to shareholders.

vince

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Re: GM - General Motors
« Reply #1663 on: May 07, 2019, 10:35:42 AM »
Some big picture thoughts that I have on GM:

Since the end of 2016, GM has added $5B to its cash horde via cash flows, offered $5B in dividends, and another $5B on the stock buyback.... investments in Lyft and Cruise have each gone up by $5B and GM spent an extra $3B for a restructuring expected to add immense value to shareholders.  That is at least ~$22B in value creation over the last 2 and a half years but shareholders have only seen the $3 from divvys and perhaps an extra $2 on the sp as a means of the investment (throw in an extra $1 for divvy reinvestment, perhaps) for a total CAGR of ~4-7%.  GM was valued at around $55B in December 2016.  Between short back of the envelope estimates above and the forward estimates provided by management for what free cash flow is going to be for 2020 (an extra $6B per year), I would estimate this stock should be valued at something closer to $100/share, yet most analysts have one year price targets in the 40-50 range while the stock buyback remains paltry.

It would seem to me that either management can't be trusted and analysts are accounting for this or I am missing something huge.  The conversation earlier on this thread would indicate the former, at this point...

Delays on, albeit ambitious, timelines (e.g. autonomous vehicle roll-out strategy [" in quarters not years"], and industry leaders - including GM - continually pushing back the estimated date of cost parity for electric vehicles) offer examples of an "over promise, under deliver" type of dynamic.

They have also said that they want to return all free cash flow to shareholders, yet the cash balance goes higher...

Does GM have visibility into an earnings shortfall that they are not divulging and/or know that the forward cash flow guidance given is not attainable or even possible?  Are the China trade deal or tariffs a much bigger issue than the pictures they are painting?  Why aren't they truly open to talks with activists (conversation with Einhorn stopped after he suggested issuing something similar to preferred debt)? 

Management should be bending over backwards to create a total shareholder return strategy now that the company is creating cash flows that are generally considered mouthwatering by industry standards and their AV strategy puts them at/near the top of the competition... but here we are?  Is management purposely waiting to create a total return strategy for some time after the B Warrants expire?

I believe Mary has done everything right for the company since her tenure started 5.5 years ago...but this.  Maybe building an extra $5B in cash this late in the cycle is the right strategy, but in my mind it should've gone toward knocking the share count down toward the 1.3B level. I know several of you share these sentiments, so has anyone else considered throwing in the towel, here?  I am not even sure a reported ROIC of ~25% and projected forward 20% FCF yield are sufficient to make up for failing to deliver on their promises the last few years.  Sentiment is the poorest it has ever been and there is no near term catalyst since they have indicated that the AV roll-out is still not quite ready for game time.

It would not be prudent to invest her money in the same manner as Elon Musk  :P, but it would seem to me that holding only $40M of stock while having been paid $100's of millions in her GM tenure is a slap in the face to shareholders.  I put this in perspective by considering Jamie Dimon, who was paid ~$130M over the last 4 years and now has ~$90M worth of stock.  Much of this is company issued stock options, but he has also made purchases using his own money of >$50M since 2007.  Mary hasn't made one open market purchase with her money in her 10 years of receiving awards from GM - Musk on the other hand has made several token purchases in his tenure while also having made a $100 Million purchase in 2013.  Mary is intelligent - why isn't she putting her money where her mouth is?  Even a token purchase of $1-2 million would go a very long way toward showing us that she truly believes in her own long term vision.

I think this is a great post.  I sold all my GM stock a couple years ago (i did make substantial profits because I bought the majority of shares, options, and warrants when the stock was in the low 20's around 6-7 years ago) largely because of the things you mentioned.  It is unbelievable to me how well she did with operations while at the same time failing to realize that she could have incrementally created an equal amount of value with a telephone and a desk.  Imagine what the stock price would be if John Malone had control of their balance sheet.  The biggest surprise for me in my 20 years of stock market studies is just how financially unsophisticated MOST CEO/CFO's are and how they don't realize how much value can be created aside from operations. I mean it's kind of embarrassing when CEO's of 100 billion dollar+ companies have to call Omaha for a tutorial on buybacks.

sleepydragon

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Re: GM - General Motors
« Reply #1664 on: May 07, 2019, 11:20:53 AM »
  The biggest surprise for me in my 20 years of stock market studies is just how financially unsophisticated MOST CEO/CFO's are and how they don't realize how much value can be created aside from operations. I mean it's kind of embarrassing when CEO's of 100 billion dollar+ companies have to call Omaha for a tutorial on buybacks.

If she is that smart and is good both operationally and financially, she could be the next Warren Buffett (or she could be running the next Enron).

fuzzhead1506

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Re: GM - General Motors
« Reply #1665 on: May 07, 2019, 12:38:48 PM »
Everyone on this board probably makes fun of the valuation that Softbank is giving to some of these money burning pre-IPO companies, but if Softbank invests in a unit of GM, then that mark to market valuation gets 100% credit.  Something tells me, Cruise is worth nowhere near what Softbank is investing at.

Except for that they aren't getting that credit.  GM, overnight, changed it's equity value held in Cruise from about ~$7B to around ~$10B and the market gave it credit for only 15-20% of that (1% on $54B is about $540M of increased market cap). I am not sure of the exact numbers so don't use my estimates as gospel, but it is stuff like this that makes me think that the stock is still just misunderstood... even if we consider that $CARZ is down 2%, that is still only giving credit for $2B in increased equity... not the full amount I estimate has been created.
« Last Edit: May 07, 2019, 12:45:47 PM by fuzzhead1506 »

sleepydragon

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Re: GM - General Motors
« Reply #1666 on: May 07, 2019, 03:35:56 PM »
Everyone on this board probably makes fun of the valuation that Softbank is giving to some of these money burning pre-IPO companies, but if Softbank invests in a unit of GM, then that mark to market valuation gets 100% credit.  Something tells me, Cruise is worth nowhere near what Softbank is investing at.

Except for that they aren't getting that credit.  GM, overnight, changed it's equity value held in Cruise from about ~$7B to around ~$10B and the market gave it credit for only 15-20% of that (1% on $54B is about $540M of increased market cap). I am not sure of the exact numbers so don't use my estimates as gospel, but it is stuff like this that makes me think that the stock is still just misunderstood... even if we consider that $CARZ is down 2%, that is still only giving credit for $2B in increased equity... not the full amount I estimate has been created.

I agree. I think most investors are still biased against GM, due to:
- post bankruptcy
- traditionally ultra competitive business (but nowaday itís a low margin un-attractive business)
- capital intensive (robots and automation has helped)
- a car company (truck is really a high margin and higher moat business)


sleepydragon

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Re: GM - General Motors
« Reply #1667 on: May 07, 2019, 03:39:01 PM »
If Mary become Teslaís CEO and Elon become GMís CEO, both stocks might go up! :)

Gregmal

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Re: GM - General Motors
« Reply #1668 on: May 20, 2019, 02:30:30 PM »
https://www.wsj.com/articles/gms-car-sharing-business-to-end-service-in-eight-of-its-17-north-american-cities-11558382917

Oh just another example of ambitious managements shunning boring old share repurchases to pursue some unnecessary business venture that ultimately incinerates capital...

ander

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Re: GM - General Motors
« Reply #1669 on: May 21, 2019, 08:12:06 AM »
https://www.wsj.com/articles/gms-car-sharing-business-to-end-service-in-eight-of-its-17-north-american-cities-11558382917

Oh just another example of ambitious managements shunning boring old share repurchases to pursue some unnecessary business venture that ultimately incinerates capital...

I completely agree that they should be stepping up share repurchases at these price levels and believe they have the capacity to do it. Though I was thinking about this one yesterday and overall I think Mary has done a good job of trying to fight off the forces of creative destruction. But I'm with you, starting buying back shares, if you think that run-rate cycle FCF is probably $7 Bn going forward!