Author Topic: GM - General Motors  (Read 663957 times)

RadMan24

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Re: GM - General Motors
« Reply #1780 on: August 18, 2020, 02:23:44 PM »
https://www.cnbc.com/2020/08/18/wall-street-pushes-for-gm-to-spin-off-its-electric-vehicle-business.html

Pressure is mounting from Wall Street for General Motors to spin off its electric vehicle business.

The spin-off company could be worth between $20 billion to $100 billion, according to Deutsche Bank.

GM CEO Mary Barra last month said “nothing is off the table” when it comes to the company unlocking shareholder value.


It would be nice for shareholders if the market decides to value the EV business like a tech company and probably overvalue it. But it sounds like a pretty crazy idea to me in terms of the business. If GM loses all the tech of the EVs, then what is left for GM? Just a dying old car business? And what advantage does the EV spin-off have if it doesn't take the manufacturing capacity of GM with it?

Can't they spin it off while retaining majority ownership? Or even minority ownership?

GM could spin-off 51% of the co to its shareholders and have it trade as a separate entity while continuing to own 49% which effectively would still give it control over the strategic direction of the company while optically not being a controlling shareholder

Just would allow the markets to reflect whatever valuation it deems fit for the the new/sexy/electric co and another valuation for the old/drab co + 49% ownership in the new co.

Unpackaging and repackaging SHOULDN'T create shareholder value, but it often does.

There's got to be a distinct difference in business lines, like Conoco and Phillips 66, in my opinion for spinoffs to work.

Problem is, GM like Tesla doesn't make the batteries. BYD can spinoff its battery manufacturing from its auto business and that would work easily to gain more auto customers without the conflict of interest and could create significant value.

I fail to see how people think electric cars are pulling RVs and going on beach trips during this pandemic. GM is a truck company and sells SUVs and Trucks. If listing the EV business means "old" GM is stuck with the profit machine of trucks and SUVs, so be it. Can't lose in that situation, less you think the Hummer EV will be a bust.


Gregmal

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Re: GM - General Motors
« Reply #1781 on: August 18, 2020, 02:38:32 PM »
The spinoff creates two radically different, pureplay businesses and likely appeases two different investor bases. EVs/autonomous vehicles have yet to really demonstrate any sort of profit model. Teslas profitability at this point relies on ZEV credits. So to split out the two rewards long term holders who saw this investment through; a liquidity event of sorts, but also refines GM core business to what I'd imagine most investors look to own in the first place...a profit machine truck/SUV company. Its financial engineering, but at GM, its about damn time they start caring about "the market" and their "valuation". You just ran through the greatest profit cycle in history and all shareholders have to show are paper losses. Patience and all that mumbo jumbo are great, but a lost decade when investing is pretty devastating.

RadMan24

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Re: GM - General Motors
« Reply #1782 on: August 18, 2020, 03:01:21 PM »
The spinoff creates two radically different, pureplay businesses and likely appeases two different investor bases. EVs/autonomous vehicles have yet to really demonstrate any sort of profit model. Teslas profitability at this point relies on ZEV credits. So to split out the two rewards long term holders who saw this investment through; a liquidity event of sorts, but also refines GM core business to what I'd imagine most investors look to own in the first place...a profit machine truck/SUV company. Its financial engineering, but at GM, its about damn time they start caring about "the market" and their "valuation". You just ran through the greatest profit cycle in history and all shareholders have to show are paper losses. Patience and all that mumbo jumbo are great, but a lost decade when investing is pretty devastating.

Yes, how did Cisco do post dot.com boom? Has it ever recouped the valuation it once had? Even though routers and switches dominated the world, Cisco joined the market exuberance and justified its valuation over another 30 years. Sounds like a lost twin decade is more of a potential issue for Tesla investors than for GM investors.

Xerxes

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Re: GM - General Motors
« Reply #1783 on: August 18, 2020, 03:05:14 PM »
For what is worth IIRC, the current president of Cruise has illiquid Cruise shares as comp and not GM shares. Whatever folks are thinking in this thread has been thought about at GM. We may not like their pace of response, but who said it was easy to turn a battleship.   

On spin off, the lower GM retains the better it is.

But what they didn’t thought about, until perhaps Nikola, is the spectacle of EVs with no revenues that can got huge multiples.

Lastly I believe the note from the Deutsche Bank analyst was more than Cruise. He was talking about all electrical cars. As a reminder Cruise is the autonomous division of GM only.

Gregmal

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Re: GM - General Motors
« Reply #1784 on: August 18, 2020, 03:19:28 PM »
The spinoff creates two radically different, pureplay businesses and likely appeases two different investor bases. EVs/autonomous vehicles have yet to really demonstrate any sort of profit model. Teslas profitability at this point relies on ZEV credits. So to split out the two rewards long term holders who saw this investment through; a liquidity event of sorts, but also refines GM core business to what I'd imagine most investors look to own in the first place...a profit machine truck/SUV company. Its financial engineering, but at GM, its about damn time they start caring about "the market" and their "valuation". You just ran through the greatest profit cycle in history and all shareholders have to show are paper losses. Patience and all that mumbo jumbo are great, but a lost decade when investing is pretty devastating.

Yes, how did Cisco do post dot.com boom? Has it ever recouped the valuation it once had? Even though routers and switches dominated the world, Cisco joined the market exuberance and justified its valuation over another 30 years. Sounds like a lost twin decade is more of a potential issue for Tesla investors than for GM investors.

Sooo then monetizing(or at least partially monetizing) one of the euphoria businesses, that, on a real, dollar earning basis, contributes zero to GM core, would be sensible, no? If Ebay can spin out PayPal, GM can spinout Cruise.

Spekulatius

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Re: GM - General Motors
« Reply #1785 on: August 18, 2020, 04:02:33 PM »
An EV spin-off wouldn’t work, because the ICE legacy business would loose all their capable employees because there wouldn’t be any longterm future. It would be an empty shell in a short period of time.
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Dalal.Holdings

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Re: GM - General Motors
« Reply #1786 on: September 08, 2020, 05:55:13 AM »

Gregmal

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Re: GM - General Motors
« Reply #1787 on: September 08, 2020, 09:15:19 AM »
Sooooo, GM cant buyback stock or pay a dividend, and is concerned about managing liquidity and resources....and then does this! At least they realize that catering to Robinhood can temporarily move the stock....Perhaps graciously hinting to their shareholders that its time to exit?

arcube

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Re: GM - General Motors
« Reply #1788 on: September 08, 2020, 09:22:00 AM »
Not sure if the $ 2bn is real cash outlay.

Sooooo, GM cant buyback stock or pay a dividend, and is concerned about managing liquidity and resources....and then does this! At least they realize that catering to Robinhood can temporarily move the stock....Perhaps graciously hinting to their shareholders that its time to exit?

RadMan24

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Re: GM - General Motors
« Reply #1789 on: September 08, 2020, 02:49:28 PM »
I mean, its on an 8-k and press release what the terms of the deal are. Amazing how we're all of a sudden talking about cash outlays and liquidity. Some people really do not get it.