Huge unreturned GM cash coffer may entice activist investors

Article by Anita Panait, on December 2, 2013

Activist investors may target General Motors Co. if the US carmaker fails to quickly return cash to shareholders from what it dubs as its “fortress balance sheet.” The United States Treasury Department recently announced that it expects to sell its remaining 31.1 million GM common shares by end of 2013, depending on market conditions, effectively ending the government's involvement in the carmaker.

According to Harry J. Wilson, a member of the US auto task force that helped rebuilt GM in its 2009 bankruptcy, the government's departure makes GM a potential target for activist investors, who may push the carmaker to pay out some of its $26.8 billion in cash via a dividend or stock buyback. 

“Any company that isn’t efficient about capital allocation is a target for activists,” remarked Wilson, who is currently a restructuring adviser at Maeva Group LLC. He noted that GM has a "huge cash hoard" and is generating more money each year, "so they need to be thoughtful about that.”

According to data compiled by Bloomberg, GM is trading at a valuation cheaper than 97 percent of its rivals. Analysts expect GM to generate $5.4 billion in free cash flow in 2014, which is double the number posted in 2012.

A push to return some cash to shareholders would be in dispute with some goals of chief executive Dan Akerson, which include maintaining spending on new products and buying back preferred shares left after the bankruptcy. GM spokesman Dave Roman said in an e-mailed statement to Bloomberg that the carmaker expects to continue to reinvest in the business, maintain its fortress balance sheet and return cash to shareholders.

Topics: gm

If you liked the article, share on:

Comments

Login or Create new account to add a comment!

Recommended

The 2018 model year could be an exciting year for fans and enthusiasts of the Chevrolet Corvette. This comes as the 2018 version of the Corvette is bound to feature...
by - January 19, 2017
As if seeing the future more than a decade from now, one of the top scientists in the world of robotics and automations is predicting that children born today won’t...
by - January 19, 2017
Ford has just recently unveiled the 2018 Ford Mustang, and as it turned out, the carmaker gave its beloved pony car a facelift. There have been mixed reactions about the...
by - January 19, 2017
The bidding war for one of the only 20 examples -- 21 actually, but the 00 version went to a museum -- of the classically beautiful Lamborghini Reventon built and...
by - January 18, 2017
Bentley once again confirmed its plans to push PHEV into their future lineups. As a matter of fact, the Bentayga SUV will be the first to have the plugin hybrid...
by - January 18, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries