GM Shares Soar on Electric-Vehicle Spin-Off Speculation
Comment of the Day

August 18 2020

Commentary by Eoin Treacy

GM Shares Soar on Electric-Vehicle Spin-Off Speculation

This article by David Welch for Bloomberg may be of interest to subscribers. Here is a section:

GM does plan to sell more than 20 EV models around 2023. That business could be spun off for $20 billion and eventually be worth as much as $100 billion, Deutsche Bank’s Rosner said. GM’s core business selling gasoline-powered sport utility vehicles and pickup trucks is generating cash but viewed as being in long-term decline and is less exciting to investors than the company’s electric-car plans, he wrote.

Despite the share gains this week, the Detroit-based automaker’s stock is down about 17% so far this year while all-electric rival Tesla Inc.’s value is eight times that of GM. By spinning off its EV business, GM could get the kind of momentum enjoyed by Tesla and a handful of startups that have lured capital despite their having no vehicles on the market.

Battery-powered cars have caught the imagination of investors in recent weeks, sending shares of Tesla to successive record levels and boosting the value of electric startups such as Nikola Inc., Fisker Inc. and Lordstown Motors Corp., all of which took a fast track chasing public listings after being acquired by special purpose acquisition companies.

Eoin Treacy's view

The entire automotive supply chain has concluded there is no future in internal combustion engines. Not only are battery costs coming down and efficiency improving but the regulatory environment continues to squeeze traditional manufacturers.

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