Thursday, September 24, 2009

The WSJ on Geely Automobile

From the WSJ "Heard on the Street" column today

Goldman Gears Up in China

Chinese car maker Geely Automobile wants to be taken seriously. It now has one seal of approval: Goldman Sachs Group's private-equity arm is investing $245 million through a convertible bond.

Geely will use the money to expand in China as it continues to reinvent its image. Its current reputation is of a company producing cheap, unreliable -- and sometimes eccentric -- vehicles. At the Shanghai auto show it unveiled a Rolls-Royce look-alike with only one passenger seat.

This has left it trailing a frothy Chinese market. Its sales this year were up 22% by the end of August, far behind the sector's 32%, JDPower figures show. The company is 10th in China, with a 2.9% share -- hence its multiple of 11.5 times expected earnings, even after Wednesday's 19% stock jump. Rival BYD, with Warren Buffett's backing and a hopeful future in electric cars, trades at 65.2 times.

Geely's investment in research and development and recruitment of overseas executives seem to be paying off, with better feedback on its pipeline of models. The next planned step could be bidding for Sweden's Volvo through Geely Holdings, Geely Auto's unlisted parent.

But Volvo would be a big bite, given Geely's small acquisitions to date and the challenges of cross-border auto deals. While Goldman is betting on a red-hot market, Geely still has to prove it can put the money to good use.

(I closed on a small transaction with Goldman Sachs where I needed a counterparty to protect a position in a completely unrelated matter. They were consummate professionals, their pricing was very good--it was much better than the street, and it was a very quick and clean transaction. I was pleasantly surprised. So I'm highlighting Geely again--It's a trade that has Goldman's backing.)


Anonymous said...

So I'm taking it that Goldman is betting on a hot-red car market in China??

It seems after goosing the indices, Goldman is now cherry picking names :P

Anonymous said...

Did you see that the guy that bought the Perot calls got busted for making $8M on insider info?

3 Days later and he is busted, yet over a year and a half later, and not a peep about who made all of the money on the massively out of the money puts on Bear Stearns.

Palmoni said...

Sure they don't have the "flash" peek at orders!

Isn't that crazy? How is it that they can't find the trail on the Bear puts, but they can find the Perot trail the next day!

But then, Goldman was one of the buyers of Bear Stearns puts--they needed it to "hedge!"

But Goldman said--it was their credit derivative division that wouldn't honor Bear's contracts

Why else did the Godfather, Secretary Paulson put a price of Bear for only $2?

Anonymous said...

LVS...back on the vegas train!

you figure everyone is shorting/selling on the Stanley Ho speculation?


Anonymous said...

are we getting a correction today?

Anonymous said...

RIMM = ouch.


Anonymous said...

are you still holding MGOL? do you recommend dumping/holding/buying more? thanks

Palmoni said...

I bought some more MGOL in the 5 range.

When ABX got $625 million from SLW, for silver production, the money was raised in a completely non dilutive way to shareholders.

What I think happened is that someone probably heard that MGOL was raising money for gold development, because that is no secret.

But I think they then assumed they would sell stock to raise the money.

Instead, I believe they will do an asset raise by selling the gold in the ground, as ABX did with silver as SLW did.

That would burn those shorting the stock assuming the money is raised that way.

If MGOL was doing a NI-43-101

then, I would assume that it would be an asset raise, as that is the standard by CSA, and Canadian investors that use that, are now doing asset raises on the gold and silver in the ground, using those standards.

Anonymous said...

Interesting post... Looks like flash memory is really beginning to become more popular. Hopefully we'll start seeing decreasing solid-state drive prices in the near future. Five dollar 32 gig Micro SDs for your Nintendo DS flash card... sounds gooooood.

(Submitted from Nintendo DS running [url=]R4i[/url] ZKwa)

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