GM Sputters on Cash Concerns
Automaker may need to raise yet more funds.
As an example of what I mean, there's been a fair amount of talk over the last few days surrounding the automaker and its potential cash needs. It all started last Friday, when it was reported that the company intended to draw down $3.5 billion from a credit facility for its planned restructuring.
However, GM's ears must have been ringing, because the talk about the company didn't end there. On Monday, Fitch Ratings "cut GM's rating by one notch to 'CCC', the eighth-lowest speculative grade in its corporate rating scale," which probably didn't help improve the investment community's perception of the company, either.
Making matters potentially worse, the price of oil rose more than $16, to almost $121 per barrel, and Congress had yet to act on the much-talked-about bailout plan. Both of those things could ultimately have an adverse impact on large consumer purchases as well.
My thoughts and concerns about General Motors given the events of the last few days are as follows:
1. Will the company need to raise money?
2. If it does need to obtain funding, is there anything that it would rule in or out, such as a convertible debt offering?
3. Will more cost-cutting be needed? If so, will there be upfront costs?
4. What else can the company do to accelerate or focus on smaller more fuel efficient car sales?
5. I'm a bit concerned to see how sales of its larger vehicles (e.g. the GMC Yukon) will be in the weeks ahead given the perk up again in oil prices.
6. I think that its IR team needs to be very proactive - and to let us know if there are any shoes that might drop. I think the last thing anxious shareholders need right now is a big surprise.
The way things stand right now, I wouldn't touch GM. There are too many balls up in the air, and not nealry enough answers. I suspect that we may see the shares fall off further in the days ahead, as some retail and institutional investors come to the same conclusion.
General Motors closed at $11.58, down $1.50, or 11.47%.
What are the pro traders saying about your stocks?
Minyanville's Buzz & Banter- 14 day FREE Trial
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter