The second half of 2010 would probably go down as the semester of Jumbo IPOs. We recently had the maiden public offering from Coal India, which, at Rs 15,000 crore, is the biggest IPO so far in India, surpassing the Rs 11,700-crore offering from Anil Ambani?s Reliance Power. In July this year, the Agricultural Bank of China (ABC) raised $22 billion from the public in a Hong Kong, Shanghai dual-listing, which until last week held the record for the biggest IPO globally. And last week we had the IPO of General Motors (GM), which at $23.1 billion has become the biggest IPO ever.

For the US auto industry, it is a case of history repeating itself but under extremely altered circumstances. Less than 55 years ago, in January 1956, when Ford Motor went public, it was the largest IPO in history and its sale of 10.2 million shares yielded $660 million (in 1956 dollars). Then, the US auto industry supremacy was the envy of the world and American cars represented the apex of the automotive pyramid. Today, as GM eases into its second go-around, there is a question mark over the future of the US automobile industry and a ?made in America? label on cars is not the most sought-after tag in terms of quality or fuel-efficiency. Moreover, it is difficult to forget where GM stood less than 18 months ago. GM had filed for bankruptcy on June 1, 2009, and its stock was trading at $0.75. The Detroit automaker was humbled before the world as it shut 11 plants, closed 1,500 dealerships, jettisoned four brands and dismissed tens of thousands of workers. The US government poured a total of $49.5 billion of taxpayers? money into GM last year to usher in the Detroit automaker through bankruptcy reorganisation.

US President Obama hailed the IPO of GM at a special White House briefing. He claimed that one of the toughest tales of the American economic recession had taken a big step towards becoming a success story. ?What?s more, American taxpayers are now positioned to recover more than my administration invested in GM,? he said.

It is pretty doubtful that the taxpayers will recover more than what they had invested. It is implausible that President Obama doesn?t know the facts of his administration?s investment, nor is it a case of Goofy Math. More likely, he is embellishing facts as politicians do, to keep the taxpayers happy and optimistic.

Here?s how the math works. US Treasury?s invested in GM $13.4 billion under the Bush administration and $36.1 billion under the Obama administration. Of the total $49.5 billion investment, GM returned $9.5 billion and the rest of the debt was converted into common stock when GM turned out its wallets, revealing nothing but pocket lint. For the $40 billion debt that got converted into equity, the government received a controlling stake of 60.8% in GM, effectively making it ?Government Motors?. With the current IPO, the Obama administration has offloaded 412 million shares or 27.5% stake, thereby reducing the government ownership by nearly half?from 60.8% to 33.3%. The US government bought 60% for $40 billion. So, for this 27% stake sale, it should have made approximately $18 billion to break even. However, for this 27% stake sale, it made only $13.6 billion, i.e., the government has had to book a loss of $4.4 billion. As a layman, if I invest $40 billion and I have already lost more than $4 billion, I don?t think I will call it a success, at least for the taxpayers.

The government still owns 33.3% stake in GM. If the stock price goes down, taxpayers will lose even more money. More pernicious is that, even now the US government is the largest stake holder in GM and the government will still call the shots. GM may probably be called a success story if the government is no longer involved in its business and it can stand on its own two feet without taxpayer help. Not until then.

GM claims that it is now very different from the bloated, debt-saddled automaker that collapsed into bankruptcy just 18 months ago. A large part of the problems that got GM into bankruptcy in the first place, is that it doesn?t have short-term ?band-aid? like fixes. The GM decline story has been one of failing to adapt to changing customer demands, reduced quality standards, increased labour costs and lack of innovation.

The Obama administration seems upbeat about the turnaround in the company?s fortunes, more for its symbolic nature than for any major favourable change in customer preferences or technology breakthroughs. GM?s return to stock markets in such a short time is symbolically a good news. However, the questionable health of GM gives the impression that the owner, and by owner I mean the Obama administration, is in a self-congratulatory mode to make the taxpayers feel happy. It seems like a case of the doctor not having enough time to fix the patient?s broken bones, so the X-ray has been touched-up to make everybody feel good.

The author, formerly with JPMorgan Chase, is CEO, Quantum Phinance