Initial Public Offerings for startups have often proven to be extremely lucrative for early investors and so will be the case when ride-hailing company Lyft conducts its IPO next week. One of the investors who could walk away with a windfall is General Motors, and if Lyft manages to raise as much as they have targeted, then GM could make as much as $1.27 billion if they cash in at the time of the IPO. While GM has not actually spoken about its plans for its stake, many believe that they could hold on to its significant stake for the long term. On the other hand, investors in GM would like the automaker to cash in on its investment and award special dividends.
GM plowed in $500 million as an investment back in 2016, and in exchange, they got 18.6 million Class A shares from the company. Considering the fact that Lyft is trying to open its IPO with shares priced between $62 and $68, GM could make anything between $1.16 billion to $1.27 billion on its initial investment. In such a situation, it is hardly a surprise that many of the investors in GM would want the company to cash out. A partner at Douglas C. Lane & Associates, which holds millions of shares in GM, stated that the company would be better off selling its stake in Lyft. The partner said,
Unless GM can leverage its investment in Lyft to accelerate its own robot-taxi ambitions with Cruise, we believe it would be appropriate to cash out its stake to repurchase its own under-valued shares.
Many hedge fund and money managers, who have invested in GM, believe that if they wanted to invest in Lyft, they would do that with their own money. It is counterproductive for GM to hold such a large stake in Lyft and hence, they should liquidate. Scott Schermerhorn of Granite Investment Advisors said as much. He said,
If I want to buy Lyft, I’ll go do it myself. Take the proceeds and invest it in something that’s core to their business or give it back to shareholders.
However, it remains to be seen what GM chooses to do eventually. Tom Henderson, who is a spokesperson for the company stated that they are pleased that they have a stake in Lyft, but refused to state what GM is planning to do with its stake.