General Motors, the once proud symbol of America's manufacturing might, reported its second consecutive quarterly profit Thursday the day before its expected filing of papers for an initial public offering.
Investors in the stock market anticipate the initial public offering (IPO) could be the largest in U.S. market history. If you find a GM IPO a bit ironic, you're not alone. The company had been publicly traded for decades before collapsing into bankruptcy in 2009.
The bankruptcy wiped out GM stockholders and left ownership in the hands U.S. taxpayers (government loans to GM were converted to common stock), Canada, some bondholders and unions.
After stripping most of the debt out of the company (and shedding some 23,000 jobs), GM came out leaner and with a mandate to make a profit. The company has turned in two impressive quarters of profits.
The IPO will offer stock to the public and give the government a chance to reclaim some of the billions it pumped into GM to keep it afloat through the bankruptcy.
Will the GM IPO be a good deal for stock investors? Normally, IPO can be risky because they are usually associated with young, unproven companies whose products may not be fully accepted in the market.
In GM's case, every stock investor knows the company and its products. The question for stock investors is can GM maintain its lean profile and profitability? Undoubtedly, there will be many opinions on these questions as the IPO nears.
If you are interested in the GM IPO, it is important that you understand IPOs and how they work.
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