So, could Apple buy GM with pocket change?

In My Humble Opinion
1

My friend and I got talking about this over dinner. Then I went and looked things up online. According to Yahoo Finance, Apple stock is values at $170.12:

And there are 881.62 million shares outstanding for a market capitalisation of just under 150 billion:

Ah, and Apple also has 19.45 billion cash on hand.

Meanwhile, GM’s stock is valued at $10.12 (they’ve gone up!):

And there are 566.15 million shares outstanding for a market capitalisation of 5.73 billion:

So Apple could theoretically buy all of GM’s stock with a third of the cash they have on hand. Is that what they’d have to do to take control of the company?

There’s also an “enterprise value” of 26.55 billion for GM. Is that what a buyer would have to pay to buy the whole company and all its assets: every contract, building, machine, computer, office chair, and thumbtack?

Apple comes surprisingly close to being able to do that with cash on hand! They’d just have to sell off enough assets to raise 8 billion more dollars.

Am I understanding this right?

I notice that Apple has around 21,600 employees, while GM has 226,000. That has to mean greater cash flowing though the organisation for GM. And what of pension obligations? There are an awful lot of retired GM workers (my stepfather among them–I grew up in Whitby, next to Oshawa, Ontario).

2

I am not a Finance expert but I do a lot of deals handling the strategic side of things, and work with my CFO to make sure the numbers work. You are on the right track with your questions about pension - and you have to include healthcare and other annuitized debt obligations. What your analysis is missing is a solid look at GM’s balance sheet - things like pension and healthcare obligations will be listed there as liabilities / debt which must be assumed by the acquiring party. I am sure it will change the basic nature of the deal you envision…

3

I’d have to look up some cites when I get back to work on Monday. But, there are certain forms and disclosures Apple would have to file if they intend to acquire more than 10% of GM. So, they couldn’t just place an order to buy 250 million shares and take over the company Monday morning.

4

I can’t wait for the next-generation iPontiac.

5

It only comes in white.

6

and in 6 months the next generation will go faster & cost half the price…

7

It’s a shame you can’t replace the battery, but the next gen will be so great why wouldn’t you just go ahead and get a new one?

8

The vehicle “Chevrolet” has unexpectedly crashed. Other vehicles on the road and your highway are unaffected. Click “Try Again” to repair and relaunch “Chevrolet”.

9

It only runs on one kind of gas, which Apple makes, and you can only get it at the Apple store.

10

Well, I just got back from the Apple store after giving them a little more money (new faxmodem; for the first time in years, I need to send a fax, and my alternative is to send it from Kinkos). So they can buy another 0.0000004% of GM now.

But would only buying the shares give them ownership? What is this “enterprise value” then?

The way things are now, the new Apple cars would also run on other roads. But you’d have to either restart the vehicle in non-Apple mode, or buy a third-party compatibility module to let it run in both modes.

11

Imagine all the cool knock-offs: iCheverolette, iOldsnodile, iPontooniac

12

One problem is that there might not be enough shares actually available to buy - if the people who own them don’t want to sell, you won’t get those shares. If it’s more that 50% of the shares, you won’t be able to take over the company. That’s the reason that takeover attempts involve offering a significant premium over the market price.