GM's return to the public markets was a success.
That at least is the opinion of some market watchers who track initial public offerings like the one pulled off Thursday by the recently bankrupt General Motors Co. Sure, its stock only rose a little more than $1 from its offering price. But that apparently was plenty enough.
There are three big numbers on the first trading day of a new stock: The IPO price paid by select buyers before the stock begins trading, the price of the first trade and the closing price. The goal: What David Menlow of research firm IPO Financial Network calls a trifecta -- higher numbers at each step.
General Motors hit two out of three. After being priced at $33 a share in the IPO, the stock opened at $35. It ended the day at $34.19, a gain of 3.6 percent, after trading as high as $35.99 in the first few minutes of trading. Almost 457 million GM shares traded, about one tenth of all trading of New York Stock Exchange shares.
"It's a delicate balance," said Menlow. "If you price the stock to exactly the demand, it's a recipe for failure. The people who got the IPO will be disappointed and look to sell."
And the difference between disappointment and success comes down to pennies.
One widely perceived failure was CIT Group's offering in July 2002. It began trading at $22.50, a mere 50 cents below the IPO price. Two years later, insurer Genworth Financial belly flopped on its first day. Its sin: It opened at 25 cents below its offering.