In what may be a sign that the market has reached a peak, on Wednesday General Motors Corp filed its IPO registration with the Securities and Exchange Commission (SEC). With the stock market behaving rather buoyantly despite a continually worsening economy, this may be the last chance for GM to cash out before the stock market catches back up to reality and comes crashing down.

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In the S-1 filing, there was no indication of the number of shares GM intended to sell, but according to a Bloomberg report, the company expects to raise approximately $16 billion. (Browse through more than 400 pages of GM's S-1 registration here.)

Should you be investing in this IPO? It depends. One year is hardly enough time to turn around a company as large as GM. And it doesn't build much confidence that Ed Whitacre announced he was leaving as CEO last week - only to be replaced by Dan Akerson, who seems to have a wealth of experience ... in telecommunications.

Pension Problems
One thing, among others, that continues to weigh down GM is its massive underfunded pension status. As of December 2009, the company's defined pension plan was underfunded by $17.1 billion. In addition, the company's pension data states that they expect to receive an 8.5% return on their plan assets. That is relatively high, and suggests they'll be looking predominantly into the equity markets to fill that $17.1 billion hole.

Roll the IPO Dice
But as IPOs in 2010 have gone on to show investors, IPO returns can be a crapshoot in these markets. Let's take a look a few of the big IPOs in 2010 and see how they've done.

Company Ticker Deal Size Total Return
SMART Technologies SMT $660mm -25.1%
Oasis Petroleum OAS $588mm +22.4%
CBOE Holdings CBOE $339mm -20.3%
Primerica PRI $320mm +41.9%
Tesla Motors TSLA $226mm +10.4%

What you'll notice from this list is that the GM IPO will eclipse all of the major American IPOs in 2010 with respect to size. In fact, it may become the second-largest IPO in U.S. history rivaling the $19.7 billion Visa IPO. However, what is yet to be determined is if the IPO will also eclipse the 2010 IPOs in returns. The only other car company to have an IPO in 2010 was Tesla Motors, and if you use their return pattern as a guide, investors (or speculators) in the GM IPO will be in for quite a ride. Tesla stock returned over 40% on its first day, but quickly fell to below offering price within a week, until finally settling down around $18 for a 10% total return - which is relatively small given the volatility.

The Bottom Line
In my opinion, long-term investors should initially avoid investing in GM stock. However as a speculator, you may want to dip your toe in this one if you like excitement and have capital to spare. With the political pressure for the IPO to succeed, GM stock could potentially be good for a quick flip. (For related reading, take a look at our IPO Basics Tutorial.)

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