TwoCitiesCapital Posted March 17, 2016 Share Posted March 17, 2016 GM has how much cash and we're worrying about a $1 billion purchase? You gotta think that those stock awards have miletones, and if met, will likely mean the investment is worth north of $300 million. So, over the next few years, can they use the platform and add to it and increase its overall value? I imagine so. I'm not worried, I find it better than the position VW is in.,. Sure, but it using a low bar of Volkswagen the standard we want to be using for investment "success"... Link to comment Share on other sites More sharing options...
tylerdurden Posted March 17, 2016 Share Posted March 17, 2016 GM has how much cash and we're worrying about a $1 billion purchase? You gotta think that those stock awards have miletones, and if met, will likely mean the investment is worth north of $300 million. So, over the next few years, can they use the platform and add to it and increase its overall value? I imagine so. I'm not worried, I find it better than the position VW is in.,. Sure, but it using a low bar of Volkswagen the standard we want to be using for investment "success"... I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 17, 2016 Share Posted March 17, 2016 GM has how much cash and we're worrying about a $1 billion purchase? You gotta think that those stock awards have miletones, and if met, will likely mean the investment is worth north of $300 million. So, over the next few years, can they use the platform and add to it and increase its overall value? I imagine so. I'm not worried, I find it better than the position VW is in.,. Sure, but it using a low bar of Volkswagen the standard we want to be using for investment "success"... I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... I'm not - in FIAT though. Just follow GM because it is cheap and is relevant to other investments. Wouldn't be happy with the money blown on Lyft and this if I were a shareholder though. Link to comment Share on other sites More sharing options...
tylerdurden Posted March 17, 2016 Share Posted March 17, 2016 GM has how much cash and we're worrying about a $1 billion purchase? You gotta think that those stock awards have miletones, and if met, will likely mean the investment is worth north of $300 million. So, over the next few years, can they use the platform and add to it and increase its overall value? I imagine so. I'm not worried, I find it better than the position VW is in.,. Sure, but it using a low bar of Volkswagen the standard we want to be using for investment "success"... I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... I'm not - in FIAT though. Just follow GM because it is cheap and is relevant to other investments. Wouldn't be happy with the money blown on Lyft and this if I were a shareholder though. I am ok with those investments. Future is uncertain obviously and therefore no one can say whether you are right or wrong on these investments but to me with the level of disruptions coming into their way, GM management is proactively trying to be at the driver seat of their own destiny. It is also developing like a good story as well. Autos have a confidence problem with the investors, especially GM, given the very low multiples they are trading these days. Some are scared from peak US sales, some concerned with the disruptions (Electric, driverless, sharing etc.) I think if GM can demonstrate to the investors that with the platform they have, they will be one of the likely winners among all these drastic changes, that would have an impact on the market perception. Even with that change in perception only, these investments can create significant value for shareholders, although in fact I believe GM will be uniquely positioned to be successful in the future with the assets they have... I am not following Fiat closely but do these potential disruption issues concern their management? Do they have any investments in electronic vehicles, driverless, sharing etc.? Just curious... Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 17, 2016 Share Posted March 17, 2016 GM has how much cash and we're worrying about a $1 billion purchase? You gotta think that those stock awards have miletones, and if met, will likely mean the investment is worth north of $300 million. So, over the next few years, can they use the platform and add to it and increase its overall value? I imagine so. I'm not worried, I find it better than the position VW is in.,. Sure, but it using a low bar of Volkswagen the standard we want to be using for investment "success"... I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... I'm not - in FIAT though. Just follow GM because it is cheap and is relevant to other investments. Wouldn't be happy with the money blown on Lyft and this if I were a shareholder though. I am ok with those investments. Future is uncertain obviously and therefore no one can say whether you are right or wrong on these investments but to me with the level of disruptions coming into their way, GM management is proactively trying to be at the driver seat of their own destiny. It is also developing like a good story as well. Autos have a confidence problem with the investors, especially GM, given the very low multiples they are trading these days. Some are scared from peak US sales, some concerned with the disruptions (Electric, driverless, sharing etc.) I think if GM can demonstrate to the investors that with the platform they have, they will be one of the likely winners among all these drastic changes, that would have an impact on the market perception. Even with that change in perception only, these investments can create significant value for shareholders, although in fact I believe GM will be uniquely positioned to be successful in the future with the assets they have... I am not following Fiat closely but do these potential disruption issues concern their management? Do they have any investments in electronic vehicles, driverless, sharing etc.? Just curious... Nope. They don't think it's worth the money and that someone more capable will come along with the technology and they'll lease it/buy it. Maybe not the "Best" position to be in, but when you're a car company and not a tech company, it does seem a little foolish to throw billions at a problem when someone else could probably solve it better and license it to you for a fraction of that cost in a decade... There has been a small amount of speculation that Fiat would be the best partner for Apple though... Link to comment Share on other sites More sharing options...
snow pea Posted March 17, 2016 Share Posted March 17, 2016 I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... Trust is not a black and white issue; one does not have to blindly trust management to make the best decisions even if one believes they are acting in what they believe to be the best interest of the shareholders. One should evaluate and re-evaluate investments as new developments occur. One does not have to like all decisions even if in aggregate one is comfortable with (or at least willing to accept) management. Everyone makes mistakes, even those you trust. For my part, I am in the camp that is highly skeptical of this use of company cash & stock. Link to comment Share on other sites More sharing options...
Ian L Posted March 17, 2016 Share Posted March 17, 2016 Automated driving might well become a commodity product that is easy for computers to do in the future. Now, even google can't do it perfectly, but in the future as computing power and software improves, there might be lots of providers who can do it perfectly. Lots of providers means cheap pricing. Look at the sat nav. 1 billion now seems very pricey. Link to comment Share on other sites More sharing options...
racemize Posted March 17, 2016 Share Posted March 17, 2016 I guess at some point you have to trust management's discretion on this type of issues. If you don't believe that Mary Barra and Chuck Stevens would act in the best interest of the shareholders with the available facts to them any point in time, you shouldn't be investing in GM anyways... Trust is not a black and white issue; one does not have to blindly trust management to make the best decisions even if one believes they are acting in what they believe to be the best interest of the shareholders. One should evaluate and re-evaluate investments as new developments occur. One does not have to like all decisions even if in aggregate one is comfortable with (or at least willing to accept) management. Everyone makes mistakes, even those you trust. For my part, I am in the camp that is highly skeptical of this use of company cash & stock. FWIW, I'm in GM more than Fiat at this point. However, I think Sergio is a much better capital allocator. Barra and co seem to be ok operators, but I have very little trust in their capital allocation. I'm glad the activists got them to do buybacks instead of dividends, so that has gotten better. But this VC stuff... Just no. Link to comment Share on other sites More sharing options...
tylerdurden Posted March 17, 2016 Share Posted March 17, 2016 We can make all sorts of forecast about 10-15 years down the way and the truth is who the heck knows including Mr. Sergio. Call it expensive but these investments are good hedges for major distruptions in the auto sector for me. In terms of trusting the management I think at some point you have to believe in their judgements because there is no way I can know their exact rationale with the price they pay and also what they plan for the company. I am not an expert in driverless tech or future of mobility etc. by any means. It's always good to have optionality and GM is expanding their options and capabilities for future. I don't have any issues with that... Link to comment Share on other sites More sharing options...
merkhet Posted March 17, 2016 Share Posted March 17, 2016 I'm skeptical of the valuation as well, but it's possible that this is one of those situations where the investment itself increases the value. Imagine you have a fantastic app. It creates awesome digital widgets that are useful to people. However, there are no users of your app. It's still worth something, say $1. Now assume Apple buys your company for $10 and places the app on every iPhone in the world going forward. Now you have users -- is that worth a 10x on the original valuation? Maybe. Hard to argue that it's not worth more than $1 though. Similar situation? Depends on whether GM could have built it out itself for less money, could have partnered with other folks like Apple or Google, etc. Depends on how the initial $100 million valuation was assessed. Depends on whether there are earnouts to the $1 billion, etc. So I'm skeptical, but I don't necessarily think that Barra has stepped off the deep end or anything. Link to comment Share on other sites More sharing options...
Guest neiljgsingh Posted March 18, 2016 Share Posted March 18, 2016 I'm skeptical of the valuation as well, but it's possible that this is one of those situations where the investment itself increases the value. Imagine you have a fantastic app. It creates awesome digital widgets that are useful to people. However, there are no users of your app. It's still worth something, say $1. Now assume Apple buys your company for $10 and places the app on every iPhone in the world going forward. Now you have users -- is that worth a 10x on the original valuation? Maybe. Hard to argue that it's not worth more than $1 though. Similar situation? Depends on whether GM could have built it out itself for less money, could have partnered with other folks like Apple or Google, etc. Depends on how the initial $100 million valuation was assessed. Depends on whether there are earnouts to the $1 billion, etc. So I'm skeptical, but I don't necessarily think that Barra has stepped off the deep end or anything. merkhet, This is a great point but I think understates execution risk. It takes a tremendous amount of willpower/cash like additional CapEx and R&D spending to roll out a product like this on even a small % of GM cars, and then there are a ton of factors that GM (and frankly every other automaker) has zero control over like regulation, competition, pricing power, etc. Since the industry is still so early-stage and speculative, a slight change in regulation, for example, could totally wreck their business model. In essence, I find driverless car technology (note: not talking about the specific car in which it's installed but the actual technology itself) to be somewhat homogenous and thus a prime contender for eventual consolidation. The car either drives itself or it doesn't; people don't give a damn about the underlying technology, etc., which makes me highly skeptical of the long-term IP value in a company like this. I think a smarter path would have been to meet with management, express interest, and wait to see if they can actually make something of themselves over the next couple of years. Let's not forget we're still in the bottom of the 1st inning of this driverless stuff, and the only automaker with points on the scoreboard is Tesla. There was no need for them to act today. And especially not by using its grossly undervalued equity. Link to comment Share on other sites More sharing options...
merkhet Posted March 18, 2016 Share Posted March 18, 2016 I don't disagree with any particular point. I'm merely pointing out that we can't just look at $100 million to $1 billion and cry foul. Also, I don't know that they used grossly undervalued equity. (Unless it was disclosed somewhere and I just missed it.) It not clear how the equity portion of the deal is structured. Is there an earnout? Are they options based? If so, what's the strike price? etc. Link to comment Share on other sites More sharing options...
tylerdurden Posted March 19, 2016 Share Posted March 19, 2016 I don't disagree with any particular point. I'm merely pointing out that we can't just look at $100 million to $1 billion and cry foul. Also, I don't know that they used grossly undervalued equity. (Unless it was disclosed somewhere and I just missed it.) It not clear how the equity portion of the deal is structured. Is there an earnout? Are they options based? If so, what's the strike price? etc. +1 I also observe lots of overconfidence about knowing how the future of mobility (very unpredictable, if you ask me) will be shaped in 10-20 years timeframe on this board. I don't think it is wise to make one sided bets in a highly unpredictable topic such as this for any organization. Also we don't know what we just don't know. Does this company have some skills/tech capabilities which are much better fit rather than Google's platform for GM's already existing capabilities for example? (GM is not starting from zero on this.) I am not sure whether I saw any details in terms of how they will make the payments anywhere (earn outs etc. etc.) I'd be really curious to hear what GM thinks about having firms that will provide the tech to Autos at a very cheap price in the future. They might have a different view on this based on their actions. Anyways, for me it is hard to assess this deal as a bad or good deal with my level of knowledge about driverless tech, GM's rationale on buying this particular asset at this price and the specifics of the transaction (payment structure etc.) therefore if I don't know enough to make an informed decision about something, I'd just admit that and move on... Link to comment Share on other sites More sharing options...
tylerdurden Posted March 24, 2016 Share Posted March 24, 2016 New article from WSJ. There are some pieces of info in terms of what could be the driver of GM's decision to pay $1B although the amount is not confirmed by the company... http://www.wsj.com/articles/car-makers-hunger-for-self-driving-tech-1458811804 “This whole autonomous-car transition, and the companies involved, is a space that is on fire,” said Mark Platshon, a senior investment adviser at BMW i-Ventures, a venture fund for German car maker BMW AG . “One billion dollars is cheap to make sure you are in the game,” he said. GM hasn’t confirmed the $1 billion purchase price. But anywhere in that neighborhood, it would represent a hefty premium for Cruise Automation, a 40-person firm with no current products. Valued at about $90 million during a $20 million venture round about six months ago, the company had planned to sell technology that allowed Audi owners to retrofit those cars with driverless technology. But that plan was scrapped as its engineers turned their attention to something else—just what is undisclosed. Reilly Brennan, who leads Stanford University’s advanced auto program called Revs, said Cruise Automation has deep expertise in “computer vision” and may have found a groundbreaking way to analyze and use the huge volume of sensor information coming into an autonomous car. “That is expertise that is frankly very hard to obtain,” he said. “The number of researchers in this area of vehicle automation is quite small.” Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 25, 2016 Share Posted March 25, 2016 Cruise Automation Looks to Expand Autonomous-vehicle startup being acquired by GM is hiring, opening first regional office http://www.wsj.com/articles/cruise-automation-looks-to-expand-1458912732 Link to comment Share on other sites More sharing options...
merkhet Posted March 25, 2016 Share Posted March 25, 2016 Cruise Automation Looks to Expand Autonomous-vehicle startup being acquired by GM is hiring, opening first regional office http://www.wsj.com/articles/cruise-automation-looks-to-expand-1458912732 GM’s deal with Cruise is contingent on the company fulfilling certain commitments and milestones, one person familiar with the deal said. Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted March 29, 2016 Share Posted March 29, 2016 bellwether trial #2 in judge furman's court is likely to go very well for GM. I guess we'll find out tomorrow. Litigation #1 was thrown out due to some scum bum plaintiff. there's 4 bellwether cases remaining through the end of this year that will likely determine settlement value. 2 will have been selected by GM and 2 by the class action lawyers. http://www.bloomberg.com/news/articles/2016-03-28/gm-judge-throws-out-key-ignition-claim-in-second-trial Link to comment Share on other sites More sharing options...
nikhil25 Posted March 30, 2016 Share Posted March 30, 2016 http://www.bloomberg.com/news/articles/2016-03-30/gm-wins-second-trial-over-switch-after-jurors-award-no-damages Link to comment Share on other sites More sharing options...
vinod1 Posted April 16, 2016 Share Posted April 16, 2016 Can anyone please help me understand why the warrants outstanding (the 136 million of $100 strike and 136 million of $18 strike) are dropping each year? In 10-K for 2015, on page 97: “The number of warrants outstanding was 70 million and 165 million at December 31, 2015 and 2014.” I do not see anywhere in the financials that they bought back the warrants. The only reason I could think of is that the warrant holders actually exercised them and statement of shareholders equity does support this. Not sure how to validate this. I send an email to investor relations. Thanks Vinod Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted April 18, 2016 Share Posted April 18, 2016 well at least 45M is because the Class C just expired out of the money. strike price was $42.31. expiration was 12/31/2015. http://www.sec.gov/Archives/edgar/data/1467858/000119312513323528/d577902d424b7.htm The class A expires July 2016, so maybe some of those are being exercised and held. I don't see it in the cash flow statement as an inflow, so maybe its netted out somewhere. GM must've repurchased some warrants too although I can't confirm this. it would be the biggest bang for their buck to repurchase in-the- money warrants. You get to reduce dilution with 40% to 60% of the capital. It's something I was hoping they would think about. Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted April 18, 2016 Share Posted April 18, 2016 only some warrants were exercised, $46M worth during 2015, which is really only 4.6M warrants if I assumed they were all class A. so basically, 45M has to have been repurchased during 2015 along with stock. It's a good question Vinod. please post here if you hear from IR. thanks! Link to comment Share on other sites More sharing options...
merkhet Posted April 21, 2016 Share Posted April 21, 2016 http://www.gm.com/mol/m-2016-opel-gm-0421-2016-1st-qtr-earnings.html Good quarter, but IMHO GM should have bought back more stock. Link to comment Share on other sites More sharing options...
rsmehta Posted April 21, 2016 Share Posted April 21, 2016 Agree with you on buying back more stock, it seems like they always buy more at the wrong prices! I get why they didn't though, and it kind of makes sense. They had negative automotive FCF, and they are being disciplined in maintaining their liquidity. Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted April 21, 2016 Share Posted April 21, 2016 how come they put 500M towards non-US pension and the balance still goes up by 200M?? Link to comment Share on other sites More sharing options...
vinod1 Posted April 21, 2016 Share Posted April 21, 2016 Can anyone please help me understand why the warrants outstanding (the 136 million of $100 strike and 136 million of $18 strike) are dropping each year? In 10-K for 2015, on page 97: “The number of warrants outstanding was 70 million and 165 million at December 31, 2015 and 2014.” I do not see anywhere in the financials that they bought back the warrants. The only reason I could think of is that the warrant holders actually exercised them and statement of shareholders equity does support this. Not sure how to validate this. I send an email to investor relations. Thanks Vinod GM Investor relations confirmed my speculation that the reduction is driven by warrant exercise. The change in outstanding warrants you outlined was driven by the exercise of some of the A & B warrants, which have strike prices of $10 and $18.33, respectively. A large number of these were likely exercised during 2015 as they were deep in the money; please recall, they were issued in 2009 and could be exercised prior to expiration, similar to American call options. I hope this explanations helps. Vinod Link to comment Share on other sites More sharing options...
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