You please all, you please none.
Those are Cramer’s words of wisdom for Treasury Secretary Timothy Geithner as the General Motors initial public offering approaches. The US’s chief financial officer shouldn’t try to serve too many masters because there’s only one right way to do this IPO.
A lottery for non-institutional investors would only anger those that don’t get any GM stock. A deal with only individual investors and not institutions could fail. No foreign buyers? That means Geithner doesn’t recognize that this is an international company first. If he leaves out the unions, that might upset the pro-labor President Obama. And so on and so on.
What Geithner needs to do is entice enough institutional interest at the offering itself that the big money follows GM into the aftermarket. And he can accomplish that by pricing the IPO just right.
“Nothing allows for a higher price for more stock in the aftermarket,” Cramer said, “than a huge pop that can be engineered by offering fewer shares and pricing the underwriting through that demand.”
That’s how the US government handles its stake in Citigroup . Treasury sold “an initial splash that whetted the palates of institutions,” Cramer said, and now the feds are getting a great price for its merchandise. And that is something that’s also good for the taxpayers.
The pressure that Cramer thinks Treasury will put on the GM deal’s underwriters is the whole reason he recommends getting in the IPO—he’s expecting Geithner to demand an attractive price for the buyers. And it’s also why he endorses Ford off this offering. Once GM shares hit the market at a higher price than Ford, the latter’s shares should shoot higher, as Ford’s the better company.
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