Little Green Idiocy: Taxpayers Taking A Bath On GM Is Great News!

Right Wing News references Iain Murray's Daily Caller article on General Motor's IPO.

Ironically, Johnson knows so little about business that he doesn’t realize the Republicans he’s quoting are right. Here’s Iain Murray at Dailly Caller explaining what a disaster the GM IPO is turning into:

When a government sells stock in a company, it is usually trying to maximize short-term revenue. Therefore, the share price is normally pegged at what the market will bear. If the valuation of the total stock offering is less than the value of the company (or a portion thereof) being sold, something is amiss. That is certainly the case with the initial public offering of GM stock sold to investors on November 17. The stock price is telling us something the federal government doesn’t want to admit, all the rhetoric about the supposed success of the GM bailout notwithstanding.

….If the federal government wanted to recoup its investment in GM, then the GM stock price should be much higher than the $33 initial price. In order to break even, as the Deal Journal reports, the stock price would have to rise to around $50 per share. So why is the Treasury Department selling off the company at a loss?

…While GM’s financial position is much better than it was when it should have gone bankrupt, the company’s finances are not great. A quick crunch of any of the numbers in the GM prospectus shows the company is not the healthy organization the politicos would have you believe. They have done a poor job running the company, even if they did save it from going under by ignoring the law and throwing billions of dollars at it. The sale prospectus even admits “our (that is, the government’s) disclosure controls and procedures and our internal control over financial reporting are currently not effective.” Hardly a ringing endorsement!

Read the full article at Right Wing News.