GM - General Motors

[racemize]

Even after this pension adjustment (whether it's reasonable or not can be argued), seems Fiat is as cheap as GM, if not cheaper, according to the data presented in this report; Arguably Fiat will have more upside due to leverage

 

near term GM 's government catalyst is more predictable, while Fiat 's merge catalyst is less predictable

 

 

Thanks for pointing that out guys... Seems to make sense

 

don't forget the nearly cost free leverage you can get via GM-B warrants.

[txlaw]

Even after this pension adjustment (whether it's reasonable or not can be argued), seems Fiat is as cheap as GM, if not cheaper, according to the data presented in this report; Arguably Fiat will have more upside due to leverage

 

near term GM 's government catalyst is more predictable, while Fiat 's merge catalyst is less predictable

 

 

Thanks for pointing that out guys... Seems to make sense

 

don't forget the nearly cost free leverage you can get via GM-B warrants.

 

I still don't understand why the warrants are so cheap.

[racemize]

I still don't understand why the warrants are so cheap.

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

[fareastwarriors]

A,B, and C holders

[plato1976]

Will GM-B warrant be screwed if GM issues a fat one time div ?

 

 

 

I still don't understand why the warrants are so cheap.

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

[hyten1]

i really hope GM don't issue cash dividend of any kind anytime soon, i rather they keep the cash or do buy backs

 

hy

 

Will GM-B warrant be screwed if GM issues a fat one time div ?

 

 

 

I still don't understand why the warrants are so cheap.

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

[PJM]

I still don't understand why the warrants are so cheap.

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

 

If GM does issue dividend, then wouldn't a warrant holder be able to exercise full share settlement and get the dividend?

 

[tng]

I still don't understand why the warrants are so cheap.

 

This is one of the more obvious mispricings in the the market because it frequently violates the no-arbitrage theory. In the past few months, there have been many times where the warrant was priced cheaper than a call option with an inferior strike price and duration.

[jch548]

Bass was just on CNBC. He was saying with rising rates the pension liability could drop to $17B. A 100 basis point rise in rates reduces the liability $8 or $9B. Thus with the rise in rates the liability should be dropping substantially next time they report.

 

Do they adjust these pension liability assumptions quarterly or annually?

[hyten1]

pjm

 

yes, but then that nice leverage you are getting will go away :)

 

hy

 

I still don't understand why the warrants are so cheap.

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

 

If GM does issue dividend, then wouldn't a warrant holder be able to exercise full share settlement and get the dividend?

[merkhet]

 

Will GM-B warrant be screwed if GM issues a fat one time div ?

 

 

 

I still don't understand why the warrants are so cheap.

 

 

Perhaps the lack of dividend adjustment?  Seems ridiculously cheap with that anyway though...

 

 

 

I believe the prospectus says something along the lines of "ordinary cash dividends" not adjusting the strike price -- a very large dividend of cash might not be "ordinary." (It's also possible that ordinary is a modifier that qualifies versus stock dividends or something like that.)

 

 

Bass was just on CNBC. He was saying with rising rates the pension liability could drop to $17B. A 100 basis point rise in rates reduces the liability $8 or $9B. Thus with the rise in rates the liability should be dropping substantially next time they report.

 

Do they adjust these pension liability assumptions quarterly or annually?

 

 

I believe those assumptions are adjusted annually.

[racemize]

Well, even if they issue a large, recurring ordinary dividend, the stock should go up to reflect the current market yield, so then the warrants sacrifice the current yield for more leverage (say 3-5% additional cost per annum).  Probably works out, unless the stock goes absolutely nowhere, but then you wouldn't have wanted the common anyway!

[fareastwarriors]

What are the strike prices/expiration dates for the various warrants?

[Guest 50centdollars]

What are the strike prices/expiration dates for the various warrants?

 

Class B 7/10/2019, strike $18.33

Class A 7/10/2013, Strike $10

Class C 7/10/2016, Strike $42.31

[racemize]

What are the strike prices/expiration dates for the various warrants?

 

See this spreadsheet for more details:

 

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

 

[racemize]

What are the strike prices/expiration dates for the various warrants?

 

Class B 7/10/2019, strike $18.33

Class A 7/10/2013, Strike $10

Class C 7/10/2016, Strike $42.31

 

I believe the C warrants exprie on December 31, 2015.

 

See:

http://www.sec.gov/Archives/edgar/data/1467858/000119312513323528/d577902d424b7.htm

 

[Guest 50centdollars]

What are the strike prices/expiration dates for the various warrants?

 

Class B 7/10/2019, strike $18.33

Class A 7/10/2013, Strike $10

Class C 7/10/2016, Strike $42.31

 

I believe the C warrants exprie on December 31, 2015.

 

See:

http://www.sec.gov/Archives/edgar/data/1467858/000119312513323528/d577902d424b7.htm

 

 

Sorry my mistake and class A expire 7/10/2016

[hyten1]

racemize,

 

quick question regarding your doc, there is a column label "switch over point with div", what is that column mean?

 

hy

 

What are the strike prices/expiration dates for the various warrants?

 

See this spreadsheet for more details:

 

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

[brker_guy]

GM to discontinue Chevrolet brand in Europe

 

http://money.cnn.com/2013/12/05/news/companies/gm-chevrolet-europe/index.html?hpt=hp_t2

[racemize]

racemize,

 

quick question regarding your doc, there is a column label "switch over point with div", what is that column mean?

 

hy

 

What are the strike prices/expiration dates for the various warrants?

 

See this spreadsheet for more details:

 

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

 

That adds in the missed dividends at the current dividend amount. 

 

There are two different relevant scenarios, so, consider BAC-A:

threshold is 0.01, and there are adjustments for anything over that, so the "missed" dividends will be 0.01 per quarter until expiry, regardless of whether the dividend is raised.  First, I calculate the switch over point, and then I add in the missed dividends, since you would have gotten those if you held the common.  Thus, you get an idea of how much the common needs to grow to break even + the dividends you would have missed, giving you a higher rate of borrowing.

 

Now, consider something like BAC Leaps, where there is no dividend adjustment:

in this case, the calculation just looks at the current dividend and adds that back similar to above.  What this will miss, however, is the extra cost of increased dividends (e.g., BAC will almost certainly have a higher dividend in a few quarters).  Same is true for those with thresholds that have not been reached yet.

 

[Yours Truly]

What am I missing on the B-warrants? Is the market basically saying GM will not be making any earnings from now until July 2019 since they trade at near break-even prices

[Guest 50centdollars]

What am I missing on the B-warrants? Is the market basically saying GM will not be making any earnings from now until July 2019 since they trade at near break-even prices

 

I dont understand it either. Is the market mispricing them? I find it hard to believe. There is so much talk about GM lately with Buffett, Bass etc. taking positions. They are very cheap.

[hyten1]

yours truly,

 

i have been scratching my head on the B warrants for awhile now. why complain when you can take advantage (hopefully i am not missing anything).  essential B warrants is a very long dated option/leap, now when/if leap trade without much of any premium typically why is that the case?

 

what do everyone think is the reason?

 

 

hy

 

[Packer16]

In essence the B warrants have a borrowing rate of about 0.7% for the strike price.  A way calc the rate is take the premium and divide in by the strike price and annualize the number. The reason the premium is low is because it is deeply in the money.

 

Packer

[hyten1]

packer i hear ya, but the B warrants have been without much premium for a long while

 

even back when GM stock was trading at $20/$19 if i recall correctly.

 

 

EDIT: i guess packer deeply in the money can be "THE" reason (even back when the stock was at around $20). I guess i always found it absurd where the B is trading, if you plan to invest int GM, why buy common when you get a cheap leverage with B without paying much premium, only risk is obviously GM collapses, but the expiration date of 2019 gives you so much time.

 

In essence the B warrants have a borrowing rate of about 0.7% for the strike price.  A way calc the rate is take the premium and divide in by the strike price and annualize the number. The reason the premium is low is because it is deeply in the money.

 

Packer