Wall Street Suddenly Notices GMAC

Stop the presses.

Wall Street has figured out that GMAC -- GM's highly-profitable finance arm -- is worth big bucks. In fact, it could be spun off all or in part and fund the turnaround of GM's North American auto business -- or even raise cash for a special payout to shareholders.

It's all in the "Heard on the Street" column (subscription required) by Lee Hawkins Jr. in this morning's The Wall Street Journal. It's an excellent piece presenting the various scenarious of how GM could use its most valuable asset. CG's hunch is that GMAC will either stay within GM or be a partial spin-off. But that's just a hunch. I could always be wrong.

Remember, the price you pay for a stock can be hugely important. An investor can do well buying a mediocre (some would say "lousy") business at a great price. It's beginning to look like those investors who bought GM stock under $30 a share could be sitting pretty a few years from now (collecting a nice fat dividend in the meantime). But, hey, I could be wrong about that, too.

Note: new readers can read the original posting on my rationale for buying GM by clicking on the menu in the upper right hand corner.

Comments

[The Assetman]

I would gather there could be a "middle ground", where GM can take GMAC public, yet retain a majority interest.

Many tech companies took advantage of a hot market for Internet stocks not long ago by partially spinning off their B2B subsidiaries. They issued shares "high", and when the bubble burst, they either shut the B2B operations down-- or bought it back at much lower prices. Sweet deal.

If I were GM, I would try to maximize whatever assets i had that are "working" right now. GMAC just happens to fill that mold nicely.

[John]

I think you're right -- floating some of GMAC would make more sense than a total spin-off.

Thanks for reading.