GM's owners, mainly the US government, sold 478 million shares at $33 each in the IPO. Shortly after the market opening yesterday, the price jumped as high as $35.99 before pulling back towards the end of the day. Almost 457 million GM shares traded, accounting for about a tenth of all trading in the exchange. GM finished up by 3.6 percent at $34.19.
The government is on its way to getting back part of the $50 billion it spent for the GM bailout. GM's debt was reduced to $8 billion from an astonishing $104 billion in 2009.
The company earned $4.2 billion in the first three quarters of 2010 and its CFO predicted huge pretax profits it the auto market were to recover to its pre-recession highs.
The government reduced its stake in GM to about 36 percent from 61 percent, making $11.8 billion in the process. Its target is $13.6 billion, and a stake of 33 percent, if bankers exercise options for 54 million more shares. If the options are taken, the government will be left with 500 million shares that must be sold for $53 each in order to recover all the bailout money.
Before bankruptcy, GM lost about $4,000 per car. Now it makes about $2,000 each. GM says its capable of earning up to $19 billion if the market were to rebound to the 17 million annual sales, a record set in 2000.
"In a sense, you're buying at the bottom of the auto cycle," Phillippi said. "So there's lots of upside in terms of volume." If GM can hold its 19 percent market share and keep making money on each vehicle, earnings should rise as the U.S. auto market slowly recovers, Phillippi said.
"We're in an up leg in the cycle. Assuming nothing blows up economically or politically or whatever, the stock is probably going to work its way higher," he said.
GM, however, is not without problems, with its pension funds short of what they ought to be, and the European division still restructuring and losing money. Also, competition is heating up from Ford and Hyundai. Toyota is starting to make a comeback too, in spite of a recent series of recalls that tarnished its image.
"They're going to have to do it on the merits," Phillippi said. "They're going to have to over-deliver on all of their promises."