For Investors, the Shine Is Off the New GM

The new General Motors (GM) made its Wall Street debut with much fanfare last November. The initial public offering that was supposed to max out at about $10 billion ended up raising more than double that amount. GM Chief Executive Officer Daniel F. Akerson had a good story to tell: The Detroit automaker had posted a $4.8 billion profit for the nine months ended Sept. 30, and new models like the Chevrolet Equinox and Cadillac SRX SUV were selling well. Two weeks after the IPO, GM was worth just $1.6 billion less than Ford Motor (F), and by mid-January the stock ran up 20 percent, to almost $40 a share, giving GM a value of $59.3 billion.

GM's feel-good moment didn't last. Since the beginning of January the stock has fallen 18 percent, to about $31, which is $2 below its IPO price. GM's market valuation now trails Ford's by almost $8 billion. Analysts fret about the churn in GM's management ranks, the aggressive use of incentives to sell its cars, ongoing losses in Europe, and a softening in the Chinese market, where GM is the leader. There's also the thin pipeline of new models. Add it up, and investors may be better off taking a wait-and-see approach, says Peter Nesvold, an analyst with New York research firm Jefferies (JEF).