GM stock is on track to return to public trading Thursday, and the hype is ramping up, which reminds us of another highly anticipated and sought-after IPO: Blackstone Group.
Remember that one? Everybody wanted a piece of Blackstone when it first offered shares to the public in late June 2007, just a few months before US stock markets hit an all-time peak. “Shares are so oversubscribed that some Wall Street analysts fear that irrational exuberance will send investors tripping over themselves to get the first publicly traded piece of the private-equity boom,” the Washington Post wrote on the day of BX’s IPO. Some headlines wondered: “Is Blackstone the Next Google?”
And what happened? BX gained in its first day of trading, then proceeded to tank and hasn’t been close to its $31 a share IPO price ever since. In fact, from its IPO price to when markets peaked on October 9, 2007, BX fell 8%, while the S&P 500 rose 4%.
Coincidentally, chatter has GM’s IPO price at $31 to $33 a share.
Also interesting to note that Blackstone’s IPO arrived during the same week that Bear Stearns pledged up to $3.2 billion in loans to support one of its hedge funds that was sucking wind because of its bets on subprime mortgages.
The key question here is this: How different a company is GM today compared to a year ago? Sure, we know it’s been relieved of a crippling debt burden, and its current costs are substantially below where they were, but where is GM competitively? GM continues to lean on incentives to lure in car buyers, and even felt the need to acquire a bank that would lend to folks with sketchy credit in order to help sales.
For more cautionary words, check out AP (and former Dow Jones Newswires) reporter Sharon Carty’s story, “Buyer Beware: GM’s IPO filing raises red flags over finances, government control, UAW role.”