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Bond Prices Propose GM Stock could Possibly be Overvalued

Bond Prices Propose GM Stock could Possibly be OvervaluedThe second-biggest IPO in U. S. history is finally winding its way toward Wall Street, and while the road ahead is fraught with hazards, some analysts still see big potential in a rebuilt General Motors.

Investors thinking about getting in on General Motors' initial public offering may want to check the bond market before buying.

Although the company hasn't specified the price or size of the offering, GM's (GM) IPO is expected to raise about $16 billion, making it the second-largest in U. S. history. It's not clear how the offering will value the auto giant, but there are already clues in the bond market.

Jeff Sands, managing director for corporate finance firm O'Keefe & Associates outside Detroit, said those in the market for the stock should be patient.

"This won't be one of those times when the public will miss out on a 15% spike out of the gates," Sands said. "If retail investors want in, shares will be available through their brokers; but I think they'd be better off waiting a couple weeks until the dust settles."

In spite of GM's checkered past and uncertain future, Sands said he believes there will be a receptive audience when the shares open for trading.

"Investors have a short-term memory when it comes to this kind of thing," he said. "GM certainly faces some tough hurdles ahead of the IPO, but I'm probably more bullish than others, and I really do think the public is ready for it."

In contrast, rival Ford Motor Co. (F) has a market value of about $40.5 billion. The company is forecast by analysts to make $6.65 billion in net income this year, according to FactSet data. That's about six times earnings.

When GM's IPO does finally hit, Sands said the market cap will likely come in at around the same level as Ford's, and while it will take time to get all the way up to $70 billion, he believes it's an entirely realistic target.

He said that, "Initially, GM will be bashed for not getting there and that will be an anchor it w