By Greg Gardner; Detroit Free Press ~ Aug 08, 2010
Investors interested in buying General Motors shares will want to read the prospectus, which the Securities and Exchange Commission calls an S-1 and financial pundits will call a "red herring." It will be long and much of it will be boring. Despite that, take time to read it. It will tell you more about the company than you likely would find in an earnings report. It will be posted on GM's investor information Web site. One can also find it through edgar.sec.gov ,v where the commission stores all documents. Here are some key things to look for: Risk factors This is where a company has to air laundry it would prefer to keep in the basement, but must disclose because it could lead to problems. For example, in Tesla Motors' recent prospectus, there's a full discussion under the following observation: "We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for the foreseeable future." General Motors' outlook will be brighter financially, but there could be other warnings in the fine print. Compensation How much will top management be paid, and how much of it is tied to the company's performance? How much stock are the top five executives buying? The more they own, the more confident investors should be. Global outlook This is important for GM because 45% of auto industry growth through 2014 is projected to come from Brazil, Russia, India and China. During the first half of the year, GM sold more vehicles in China than it did in the U.S. Competition How GM regards its competitors will shed light on where it thinks it must improve. What competing vehicles does it see as the benchmark in different market segments? Raising capital later This will show whether GM has re-established trust with investment banks and insurance companies and is a key indicator of how much work it has already done to operate as an independent, publicly traded company. Contact GREG GARDNER: 313-222-8762 or [email protected] |
