GM stock slides after Hughes swap
By Ted Griffith, CBS.MarketWatch.com
Last Update: 2:59 PM ET May 22, 2000 NewsWatch
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DETROIT (CBS.MW) -- Shares of General Motors fell Monday after the automaker completed an offer to grant investors shares in its Hughes Electronics affiliate in exchange for shares of GM common stock.
General Motors (GM: news, msgs) shares fell 8 5/16, or 9.6 percent, to 78 5/8 in recent trading.
Shares of Hughes (GMH: news, msgs), meanwhile, gained Monday after General Motors said the exchange offer was significantly oversubscribed. Hughes jumped 7 1/16, or 7.9 percent, to 96 15/16 in recent trading. Hughes shares closed Friday at 89 7/8.
General Motors shareholders appeared eager to get shares of Hughes, which is focused on communications services including DIRECTV, the largest US satellite TV broadcaster, according to Hoover's.
GM said Monday it would accept about 86.4 million shares, a quarter of the 335.8 million total shares offered by GM common stockholders, and, in return, the investors will get 92 million Hughes shares with a reported value of $8.3 billion.
In a statement GM said "the exchange offer is an important element of GM's previously announced plan to restructure its economic interest in Hughes in order for GM and its stockholders to realize more of the economic value of Hughes arising from the corporation's ownership of Hughes."
UBS Warburg analyst Saul Rubin Monday called the decline in GM's share price a buying opportunity.
Although GM has problems, "they must be kept in context. GM is improving mix and productivity faster than Ford, and we believe the GM auto business should command a multiple similar to Ford's," Rubin wrote in a research note. "This justifies a $105 price target."
At the beginning of February, GM's board approved a swap of GM's economic interest in Hughes Electronics, which included an offer to its current shareholders to repurchase stock representing GM's automaking operations, in exchange for about $8 billion of Hughes (Class H stock) and contributions of approximately $7 billion of Class H stock to GM benefit plans.
In March, GM's board authorized an increase in the amount of the share exchange to $9 billion to offset new stock issuances being used to finance the acquisition of a 20 percent stake in Fiat Auto. |
