Chrysler is going to do an IPO for maybe around $100 million. The deal will be a Freddy Krueger bloodbath à la Halloween. Set aside the fundamentals of the car business and where Chrysler sits in the fray.
Look and then look again at Fiat vs the UAW controlled health care trust. The UAW side controls some 41.5%. Despite what a unionist may think that is not a majority. Fiat which is controlled by Sergio Marchionne. Fiat wants to buy out the union because right now they cannot access Chryslers cash to fund problematic European operations.
Chrysler has some $11.9 billion in cash. Fiat in Europe has some $13 Billion. The union is valuing Chrysler around $4.27. Fiat is saying $1.75. the union trust fund needs cash to pay obligations so they are forcing a capitalist resolution by allowing the marketplace to discover the price. Pretty clever for a trade union. they must have hired some Wall Street firm.
The deal will be a pissing match. Fiat calls the shots and can easily deflate market value with a few opportunistic problems and then make a market value offer. The union is faced with the knowledge that anything they control eventually goes bankrupt. Which would be an excellent price for Fiat.
The problem is reminiscent of a fighter ace going into a downward death spiral trying to ward of an attacker on its tail; all the while hoping to pull up just in time.
The story is very exciting and gets the left-wing right-wing blood lust going. But why the hell would you buy the stock and get on this ride. reading the WSJ daily will be just as exciting.
So whether you are a prospective investor or the union trust trying to raise some cash just remember Sergio Marchionne is not trying to put money in your pocket.
The $100 million is a pawn on this chess table. Pawns are there to be sacrificed.
George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti