General Motors Co. has got to be envious of Ford Motor Co., which has taken its place as Detroit’s darling. But as GM prepares its initial public offering, Ford’s rising shares could actually benefit GM.
As Ford is GM's only major US-listed competitor, company investors and bankers are turning to Ford as they attempt to determine the GM’s theoretical value ahead of the high stakes IPO. The value of GM could be calculated several ways.
One method is to use a multiple of its projected cash flow based on Ford's multiples. Another way is to do an implied value calculation based on where GM bonds are trading.
Initial expectations have been for GM's IPO to weigh on Ford's shares, which have risen sharply since achieving a record $1.02 low in November 2008 and were trading around $12 when reports of GM's stock float first came out last May.
Ford executives were asked constantly to evaluate the risk that mutual funds and other institutional shareholders might "rebalance" their portfolios, dumping Ford stock and purchasing GM. [via autonews - sub. required]