How Much Would A GM EV Spinoff Be Worth? Deutsche Bank Analyst Says $15B-$95B

There has long been chatter of a potential General Motors(GM) spinoff of its electric vehicle business. Barron’s reports that Deutsche Bank analyst Emmanuel Rosner, who calls the deal a “no-brainer” would be worth between $15 billion and $95 billion dollars, and not lead to much of a decline in enterprise value for the core business, which trades at 7 times earnings.  That’s a massive range of possible values, but what’s $80 billion between friends, anyway?

Pure play EV companies without any real revenue have been treated to ridiculous valuations(we’re looking at you, Nikola(NKLA) and Tesla(TSLA)). GM’s EV business is currently small, but “Rosner believes GM can grow battery-powered-car sales from less than 60,000 vehicles in 2021 to more than 500,000 by 2025. That represents almost 70% average annual growth.”

Of course, GM has not in any way indicated this is on the table.

Rosner has been thinking about a spinoff for a while. He asked GM CEO Mary Barra about such a deal on a recent company conference call. Barra gave a noncommittal answer. GM didn’t respond to a request for comment about the likelihood of a spinoff by Barron’s, either.

At present, Barra seems to be focused on growing her business, not her valuation. If she is successful at the first, the second will inevitably follow, though GM would be unlikely to ever attain the level of irrational exuberance that other EV stocks are benefitting from. On the other hand, Barra said that “nothing is off the table” regarding a spinoff.

“We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value, so I would say nothing is off the table,” she said.

Barra added that she saw no impediment to such a move.

Earlier in the call, Barra addressed a question around a name change for GM that would emphasize its EV efforts.

“Why not call the company Ultium?” Morgan Stanley analyst Adam Jonas asked, citing GM’s advanced battery technology.

Barra said GM evaluates questions like that given its push to invest in EVs and other advanced technology.

GM needs to perform, developing new technology and driving down battery costs, to get Wall Street to care about its stock, she said.

So Jonas believes that merely changing the company’s name from the venerable General Motors to the comic book villain Ultium would add billions to the valuation. And he might be right! Valuations have become totally untethered from reality and the inevitable reckoning will be painful indeed.

Disclosure: The author holds no position in any stock mentioned