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Why General Motors Stock Revved Higher Today

By Rich Smith – Nov 22, 2021 at 5:25PM

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Will GM issue an electric-car tracking stock? "Barron's" thinks so.

What happened

Shares of General Motors (GM -0.05%) stock closed up 3.7% on a mostly "red" day for stock markets on Monday.

Today, GM announced that it has bought a 25% interest in electric-boat maker Pure Watercraft -- but I doubt that's the reason GM stock popped today. 

Glowing green arrow climbs on a stock screen.

Image source: Getty Images.

So what

Why not? Well, for one thing, GM didn't give many details about its Pure Watercraft deal. Aside from stating that it will "integrat[e] GM technology into a variety of applications," the automotive giant didn't clearly explain what synergies it sees between cars and boats. Nor did GE give details on the size of the acquisition, either in terms of Pure Watercraft's sales or earnings -- or even the price it paid.

Outside of boating news, however, there was some optimistic news for GM. Specifically, over the weekend Barron's magazine suggested that General Motors might be considering creating "tracking stocks" for its "next-gen vehicle operations, such as EV, robo-taxi, etc."   

Now what

Tracking stocks generally represent (or "track" the performance of) high-growth segments of a parent company, and thus can grow faster than the company's own stock. Selling tracking-stock shares can therefore generate cash for the company to use to grow those specific businesses without having to officially spin them off -- thus unlocking value in a stock that's been performing poorly.

Of course, GM stock has not been performing poorly of late. Its 38% rise over the past year is actually superior performance to the S&P 500's 31% gain. But given the excitement surrounding EV stocks lately, it stands to reason that if GM did issue a tracking stock or stocks to represent growth in its most popular businesses, such tracking stock(s) might grow even faster -- and that would be good news for GM.

In fact, according to Barron's, it's an "absolute no-brainer."

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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