GM attracts car buyers by offering cash incentives for you to drive away with one of their cars so I suppose it makes sense to them to offer cash incentives to investors to drive away with stock certificates. The difference is, when GM goes bankrupt – the car is still worth something!
GM still fascinates me every time someone buys it. I guess people were buying Calpine too before the totality of their failure set in. You would think a look at this 2 year chart would stop someone from buying GM, BUT Nooooooo!
http://finance.yahoo.com/q/bc?s=GM&t=2y&l=on&z=m&q=l&c=cpn
This is what a company looks like just before it dies! Change the symobl on the chart to TM and you can see exactly where all of GM’s value went.
What really kills me about GM this week is they seem determined to pay out their usual $1Bn dividend as if nothing is amiss. Last year they made $3Bn, the year before that $4Bn, the year before that $1.6Bn – this year they are posting a $3Bn loss!!! Perhaps now is not the best time to give all the stockholders $2/share for the year…
How many people do you think are holding on until December 10th, just to get that little bonus? I’m sure Mr. Kerkorian is, he paid $31 for this mess and I’m sure he’d like to at least pick up a couple of bucks before he moves on. On the other hand, what if they cancel it? It’s a real damned if you do, damned if you don’t kind of thing.
Also, I noticed something strange on the books: The company declared a $12Bn gain in cash from “Investments” last quarter which is a huge and unusual amount that, frankly, makes me suspicious. Without that shot of cash, the company would have been cash negative to the tune of $13Bn for the quarter!
Not as strange but ignored by the press is the fact that the company has goosed income this year by reporting a negative income tax expense of $6Bn in the first 3 quarters. If they are getting a refund, great but if they are booking a tax credit accrual based on “future earnings” then that will be just another $6Bn that poofs away during bankruptcy.
Other unusual items they booked last quarter were:
- $5Bn from “Financing Activities” vs $5Bn in all of ’04, $1.3Bn in ’03 and none in ’02
- Receivables are down $5Bn (25%) for the year, payables flat.
- Goodwill is up $2.5Bn – maybe GMAC bought someone?
- Long term investments are down $14Bn (perhaps that is how they got it into CF)
- Short term investments went from $23Bn to $0 (or maybe there)
- Property Plant and Equipment have gone up (according to GM) $23Bn (25%) in value!
- LT Debt is down $22Bn (7% – yay!) but “Other Liabilities” are up $17Bn (40% – boo!)
You can play a lot of games when you have $469Bn in assets. A Billion here, a Billion there and you can “razzle dazzle ’em” and all that jazz but, at the end of the day, $6Bn in losses has got to hurt…
Another thing to keep track of on the GM story is US Steel, the companies tend to have an inverse relationship since steel is one of GM’s largest expenses (next to health and labor) so X’s fortune is GM’s misfortune.
http://finance.yahoo.com/q/bc?s=GM&t=1y&l=on&z=m&q=l&c=x
Calpine was brought back from the dead several times before this quarter so GM my get some miguided boost along the way as well – people are a lot more psychologically predisposed towards GM than Calpine… GMs books make Calpine look healthy by comparison!
Speaking of Calpine, I must mention that on August 24th (at $3/share), Calyon Securities issued a buy recommendation on the stock – Possibly the worst call of ’05 (but there are so many contenders!) costing their flock a pretty quick 90%.
That being said, I may take a tiny bit of pure gambling monney and pick up the CPN Jan ’08 $2.50s for .1 (maybe .05 if I’m lucky). If anything positive happens over the next couple of years I could be one happy camper!
One other related tip – Barclays PLC (BCS) is a major holder of Calpine and GM with losses of $60M on CPN and $200M on GM since 9/30. It’s almost impossible to figure out the books on foreign companies but I have to figure they are in for a rough patch as I see their name on a lot of prominant failures and they were looking a little overbought anyway.
