Ten years ago General Motors made its second debut on the New York Stock Exchange in what was then the largest public offering in US history, ushering in a new era of renewed optimism for the company and the US economy after emerging from bankruptcy in the Great Recession.
Then-CEO Dan Akerson rang the opening bell on November 18, 2010 with a group of executives that included former Vice Chairman Steve Girsky, current President Mark Reuss and then GM Treasurer Dan Ammann, who now heads the automaker Majority owned cruise autonomous vehicle subsidiary.
“To ring the bell, that was the first step to success for me, then we had to go to work,” Akerson told CNBC on Wednesday, adding that he remembered going to the marketplace to applaud . “It was really humbling. I got emotional … I’ve never been as proud as the GM organization.”
Investor interest was high in the hope that one of America’s best-known companies could make a comeback. GM initially raised $ 20.1 billion and its shares opened at $ 35, $ 2 more than the IPO price.
A decade later, the “new GM” has a solid record and the company is the leanest in decades. However, the stock has posted a miserable total annualized return, including dividend payments, of 5.2% over the past decade, compared to 14% for the S&P 500, according to FactSet. In other words, $ 10,000 invested in GM when it went public, plus dividends reinvested, would be worth roughly $ 15,879 today, compared to $ 36,742 in the S&P 500.
“It was basically a treadmill stock that saw the market move right. It was a significant underperformance,” said Dan Ives, chief executive officer at Wedbush Securities. “There were a few hits but a lot of misses, and I think that was investor frustration for such a strong person with so much R&D, technology and sales under the hood.”
GM CEO Dan Akerson rings the opening bell of the New York Stock Exchange when the automaker returns to the US stock market on November 18, 2010
Morningstar’s David Whiston, who has long been optimistic about GM, described the company’s stock performance over the past decade as “volatile and frustrating.” “It was mid-teens and it was over $ 45. But even if it’s done well, it never really sustains,” he said.
At its peak, GM’s stock rose more than 40% from its October 2017 price to $ 46.76 per share. The stocks have since lost all that momentum, falling 57% from their IPO to an intraday low of $ 14.33 a share on March 18, according to GM, Ford engine and Fiat Chrysler announced the temporary closure of all U.S. factories due to the coronavirus.
“The stock is really in trouble if you annualize it over the past decade,” said Garrett Nelson, senior equity analyst at CFRA Research. “It’s a pretty low return.”
Current CEO Mary Barra and other GM executives have steadfastly said they will control what they can about the business to prove the company’s value to Wall Street and promise to do whatever it takes to create shareholder value. A company spokesman repeated these comments on Tuesday.
Since GM stock hit its all-time low earlier this year, stocks have rebounded. They are up 19.9% this year, a 33% increase since the company’s IPO of $ 33 per share.
But the gains are tiny compared to Tesla’s went public five months before GM Tesla shares, while more volatile, have risen more than 400% this year and have led the company in the past Toyota Motor to become the most valuable automaker in the world.
GM’s ability to compete against Tesla, as well as the cost of converting its fleet of vehicles to all-electric, are the main reasons CFRA Research has a “sell” rating on GM, according to Nelson.
“While you plan to move your portfolio to an all-electric future, you are pretty early on in the process,” he said. “I think they had a lot more mistakes than hits if you look at their EV models that they introduced over the last decade. None of them sold particularly well.”
He predicts a “very difficult road” if they want to compete against Tesla in electric vehicles.
GM has tried to get investors to rate it more like Tesla, which is viewed as a technical disruptor rather than an automaker. Thanks to these considerations, Tesla’s market value has surged to over $ 400 billion despite years of losses. GM, on the other hand, is 112 years old, has decades of profitable years behind it, and consistently exceeds Wall Street’s profit expectations – and yet has a market value of only 60 billion US dollars.
Describing the GM-Tesla situation as a “double standard,” Whiston said if a traditional automaker did what Tesla did, including announcing plans to go all-electric years ago, its inventories would have plummeted.
“But while Tesla is doing it and money is bleeding, it’s a growth story,” he said. “I’m not trying to take anything away from what Tesla has achieved, they have achieved a lot. It’s amazing. But I’m not buying the argument that only Tesla will be able to bring electric vehicles to everyone. In Almost every automaker becomes a reality. “
Before Covid-19 closed its factories in March, GM announced plans to invest $ 20 billion in fully electric and autonomous vehicles by 2025. Despite the pandemic, the company has announced that it will maintain, if not increase, these investments.
Many analysts see GM’s plans, including its long-term goal of exclusively offering electric vehicles, as hope that the next decade may be better than the previous one for the “new GM”.
2022 GMC Hummer EV Sport Utility Truck
“They threw a lot of darts with many that they missed. The road wiped that out in terms of history and the future,” said Ives. “It’s about their core business in the automotive sector, of course, but the golden goose is EV.”
GM has “nailed” the strategy, he said. “Now it comes to execution, but that is the key.”
Several analysts recently raised their price targets for GM after the company significantly exceeded Wall Street’s expectations during the pandemic and successfully launched its all-electric GMC Hummer. Many cited the company’s performance as well as its future EV strategy.
GM is “back on track and will likely enjoy strong momentum well into 2021, “said UBS analyst Patrick Hummel earlier this month. Investors will see GM as an” aggressive “electric vehicle company over the next year or two, rather than a slow-growing manufacturer like that the rest of the Detroit automakers, he said.
“With a focus on crystallizing the value of its EV strategy … GM is likely to gain more credit for being a relative winner of the transition,” Hummel wrote in a Nov. 9 investor note.
Ives agrees, “If GM is successful in electric vehicles, they will see re-evaluation as part of that. I think investors are starting to realize that as they look at GM in the future. On the EV side, I think they can in the next be a legitimate player for ten years. “