Fundamental issues with the GM IPO

The GM IPO (General Motors initial public offering) has come and gone, with the stock price settling just above $34 at the end last week. A few of you may have even been able to get your hands on some shares.

The fact that shares were scarce may be a blessing in disguise if you are using any investment technique other than purely technical analysis (and since there isn’t a whole lot of price/volume action to use, even that technique is a stretch).

Here’s why:

The prospectus states the following:

“We [ed.GM] have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”

For you, the retail investor, the lack of effective internal controls means that you cannot trust the numbers being reported by GM. Which means that fundamental analysis techniques will not work.

After taking my personal situation into account, Ford (F) stock is a better play. But if I make that statement, I also have to say that there are many other investments that are much better than either Ford or GM for me personally!

Full Disclosure: The author does not own any positions in General Motors (GM) or Ford (F).

About these ads
This entry was posted in Current Events, Investing and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s