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GM Initial Public Offering On Track as August Sales Plummet 25%

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General Motors sales fell 25 percent in August, trailing analysts estimates that the automaker, whose investment bankers will soon be coming to a city near you to sell your pension fund or money manager shares in its new initial public offering, would only show around a 20 percent slump in sales.

Overall, August auto sales were likely the slowest in 28 years, according to Bloomberg; that despite GM and Ford both boosting incentives to purchase cars.

Okay, so you're out there shaking your head right now, possibly thinking, "well, they employ a lot of people, guess we need to keep them around as long as we can," and su enough, GM does employ about 250,000 worldwide. As well, it's kind of tough to explain to your neighbor why GM shouldn't be in business and why this initial public offering is just a tragic misuse of capital. After all, isn't the U.S. government reducing its stake in the company to a mere 48 percent through this IPO?

Well, let's look at it from another perspective. In November, GM is going to attempt to raise around $15 billion dollars. Where is that $15 billion going to come from? It's going to come from pension funds, hedge funds, mutual funds, investment banks, perhaps a couple of foreign banks and even some retail investors. But here's the key to understanding how wrong this is: that money is investment capital that could go to invest in viable businesses that actually have sound business plans and might be poised to employ even more people in the future. To put it bluntly, this is a classic misallocation of capital to a dying business that will have the very real net effect of reducing capital available to sound businesses.
POSITION:  No positions in stocks mentioned.