UAW scores big with GM IPO
When the regime turned US bankruptcy law on its head with the bailout of GM, investors and taxpayers were big losers. GM’s stock and bondholders, you know, the ones who had actually lent money to the company, had to take a 1-100 reverse stock split on their investments (more here). Most were wiped out in the government enforced process. As an aside, the very GM execs who were responsible for the company’s failure reaped big bonuses in this perverted “bankruptcy” (more here).
Now that the “new” GM has held its IPO (more here), the government has recouped about 30% of the taxpayers’ “investment” while the original creditors got virtually nothing. One group however, will ultimately get the best deal of all – the unions. It appears that the regime engineered this deal so the unions would win while everyone else loses (story here).
General Motors Co.’s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company’s union.
Thanks to a generous share of GM stock obtained in the company’s 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.
The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.
“Priority one was serving the interests of the UAW” when the White House’s auto task force engineered the bankruptcy, said Glenn Reynolds, an analyst at CreditSights. The stock offering served to show once again how the White House has handsomely rewarded its political allies, he said.
The union’s health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.
For taxpayers to break even, by contrast, the stock would have to rise to at least $52 and by some estimates as high as $103 — levels that would take years to achieve.
And the ones who actually had money invested will never come close. They’ll be extremely lucky to get 30% of their original investment.
Perhaps the biggest losers are the investors in the old GM. None of the bankrupt company’s previous stockholders got any money, while the claims of thousands of investors who purchased the company’s bonds are still being kicked around in a Manhattan bankruptcy court.
“It gives outraged flashbacks to the old GM bondholders,” who remain mired in the bankruptcy proceedings and are unlikely to recover more than 30 percent of their investments, Mr. Reynolds said.
He compared the deal to the corrupt crony capitalism in Russia under President Vladimir Putin.
The White House “took a page out of the Putin political asset reallocation and reward system” when it engineered the deal, he said.
Mr. Reynolds also described the White House deal as a combination of “Boss Tweed on steroids” and “Hugo Chavez on meds,” as far as the bondholders are concerned.
This should come as no surprise to anyone. Unions overwhelmingly supported our dear comrade leader’s campaign and continue to support the regime’s policies. This is nothing more than payback for that support.