Shares of General Motors reached an important milestone Friday, closing above their initial public offering price of $33 for the first time in more than two years.
GM shares reached $33.77 Friday before slipping back to close at $33.42, up 3.2 percent. The auto giant sold shares to the public for $33 in a November 2010 IPO, but they’ve traded below that price since May 4, 2011.
GM’s business is getting stronger. Two weeks ago, GM reported solid first-quarter earnings on robust sales in North America. On Friday, there were signs sales declines may have bottomed in Europe — where GM has lost money for more than a dozen years.
Shares of all automakers traded in the U.S. show double-digit gains this year. GM and Ford are benefiting from strong sales in the U.S. as well as China. And investors believe the Japanese government’s economic policies create an advantage for exporters such as Toyota and Honda.
Investors’ overall enthusiasm for stocks also has helped automakers’ shares. And as stock markets set records, investors use some of their gains for a down payment on a car or truck.
But GM’s 14 percent gain this year is also notable because of its top shareholder: the U.S. Treasury.
The government has been selling off the GM shares it received after providing the company with a $49.5 billion bailout in 2008 and 2009. The government has pledged to sell off taxpayers’ remaining 16 percent stake in GM by early next year. The rising stock price may hasten its exit.
That would be fine with GM, which long has complained that government ownership has discouraged some car buyers from considering GM cars and trucks and steered some investors away from the shares.
In general, consumers have been anything but discouraged about buying cars. An improving job market and the Federal Reserve’s low-interest-rate policies are helping. Also, GM and Ford finally are getting credit for improvements they’ve made in their finances and vehicles, said David Whiston, an analyst with Morningstar.
Sales hit 14.5 million last year after bottoming out at 10.4 million in 2009, and they’re expected to rise as high as 15.5 million this year.
Still, analysts are divided on how much further GM shares can climb.
Itay Michaeli of Citi Investment Research gives GM a “Buy” rating with a one-year price target of $38.
But Jamie Albertine, an auto analyst with Stifel Nicolaus, is keeping a “Hold” recommendation on GM, saying the price surge isn’t backed by broader economic indicators in the U.S. “There’s still a very big and profound disconnect between the market and what the average Joe is experiencing,” he said.
GM, he said, has done a lot right since the IPO. The company has bolstered its balance sheet by generating cash and cutting pension liabilities buying back shares from the government. There’s a possibility of resuming a dividend.
The company also is replacing its models at a faster rate than in the past, Albertine said. But though the Cadillac brand has seen sales improve, Chevrolet, by far GM’s largest brand, lacks hits. “I don’t think they have many game-changers,” he said.