Why is GM's stock price now below its IPO price of 2009?

Gorehamj · July 8, 2015

John Goreham
Contributing Writer, GM-Trucks.com
7/15/2015

Why don't investors love GM? The company is selling record numbers of vehicles, and it does not have to pay any tax on its profits for decades due to a "unique" bankruptcy deal it struck when it restructured six years ago, The General's trucks are clobbering the Ford F-150 in overall sales, GM has innovative, and diverse green car technology to keep the government on its side, and its specialty cars like the Corvette and Camaro are the envy of the world in terms of performance, value, and sales. So why aren't investors seeing value in GM stock? If we read the reports correctly GM's stock price is 33% below the value it would have had if it had just kept pace with the S&P 500 since it was added in June 2013.

Valuewalk.com says that it could be that investors see GM as an "old-school" automaker and thus the stock value is impacted. Here are some thoughts we might add:

- Investors were once burned by GM during its restructuring.

- GM Execs may be indicted on Federal charges stemming from the ignition defect deaths (now well over 100 deaths attributed to this)

- GM seems to be doing everything in its power to be a truck company that dabbles in cars. A formula that led to its demise in 2008.

- Huge discounts on trucks may be diluting the only bright spot in moving to a truck-heavy sales sheet.

We have reached out to some GM stock experts for their opinions and will either update the story or ask them to comment directly below. What are your thoughts as GM fans, owners and enthusiasts?

Related Story - GM earns better investment rating

Gorehamj · July 9, 2015

An industry expert, former equities trader, and former GM employee (Saturn) sent me this excellent overview by direct e-mail. Thanks Frank:

The stock situation for GM is far more a fundamental story than a stock technical story. Fix the fundamental aspect and the rest will follow. First, GM as a company has many after-tastes still lingering, such as bankruptcy, ignition switch mismanagement to name a few; and the press has not gone away and won't until the trial is ended.

On a technology scale, GM is supposedly on the higher end with the Chevy Volt. I now own one and like it very much. But as usual, GM squandered its press opportunity to make that car super green. First, there is no nat-gas option; the generator motor should get better mileage than what it delivers. The recharge time is ultra-long at 110V and I refuse to pay another grand to add 220V which still only gets me down to 6-8 hours. Point is, I can blow through that 40 mile e-drive resultant very quickly, but still good for a retiree. A trip from Detroit to Indianapolis and back required far more fill-ups than I anticipated due-to the small gas tank and the less-than-diesel MPG on the highway.

I heard this stock report on CNBC as well, but many contributors prefer Ford as the better stock investment. In my opinion, new GM is still run mostly by old GM people; and that's a problem. Yes, familiarity with the corporate culture is important, but when GM had the golden opportunity to Saturnize its culture after bankruptcy, the old guard (now known as new) balked and cut bait. So, it's the same ole same ole GM. It reminds me of what I wrote in my first book, "Perfecting Corporate Character," where I used the term shape-shifting to describe change that you cannot believe in.

Notice that GN is shifting efforts toward the upcoming, Chevy Bolt, the BEV. At issue will be the driving range and the type of charger. Without 480V fast charge it will be just another EV. Tesla, on the other hand, with its expensive car still delivers the key to mostly what people need and want: longer driving range. For the record, I experienced an unexpected case of driving range anxiety on the highway with my Volt using gasoline. I had to convince myself that the battery storage would be my spare tank.

Also note that GM is playing behind the 8 ball with Ford on aluminum bodies. Ford beat them to that punch with the F-150; and is more ready for the next wave of MPG mandates.

So, GM reminds me of being luke-warm as an investment; neither hot or cold..

Frank Sherosky