The GM IPO: How Wall Street--and Main Street--Will Make Money

Last Updated Nov 17, 2010 10:53 AM EST

There's a lot of grumbling going on because ordinary investors -- the tabloid New York Post used the term "Joe Six-Pack" -- won't be able to buy many shares in the General Motors IPO this week, because big institutional investors will snap it all up before anyone else gets a chance.

Here's the problem with that thinking Joe Six-Pack might not be a buyer for the GM IPO, but Joe Six-Pack is a seller, big-time. In the long run, it looks as if Joe Six-Pack will be well served, as GM sells more and more stock.

This mini-controversy also means GM must be doing a lot better than anybody would have dared hope. At the end of 2008, many wondered whether there would even be a GM. Two years later, people are ticked off because they won't be "allowed" to invest in GM? That's some turnaround.

There really isn't too much reason to worry about Joe Six-Pack. Don't forget, since last year's bankruptcy, the UAW Retiree Medical Benefits Trust owns 20 percent of GM. That represents a lot of ordinary Joes. Two years ago, people were wringing their hands that the retiree trust had to accept shares instead of cash. Today, the trust is sitting on a valuable asset.

Nor should we forget the U.S. Treasury owns just over 60 percent of GM, and Canada owns another 12 percent. All those shares don't go on sale initially, but the eagerness for GM's initial shares bodes well for those interests.

Still, it's easy to understand why people are upset that only "Wall Street" types will be in a position to buy into the GM IPO. Taxpayers are still angry at Wall Street for bringing about the Great Recession that forced GM into bankruptcy in the first place. The notion that Wall Street will reap the rewards from GM's turnaround is hard to swallow.

"It certainly would be nice," if ordinary taxpayers had more of a say in the GM IPO, said David Menlow, president of research firm Ipofinancial.com. "The tax-paying public was not queried what to do with this IPO, yet it was taxpayer dollars contributing to this company being bailed out. If I helped (save GM), I would like a chance to buy shares at the IPO price," he said.

Menlow also poked holes even in the notion of a "Joe Six-Pack" investor. After all, an "ordinary" shareholder that's supposedly missing out on the GM IPO already is an investor that has active accounts with a stockbroker, he points out.

So, relax: Joe Six Pack--and the rest of American taxpayers--will do just fine with GM's IPO.

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