GM stock

Update: 7/21/09 – Last week the “old” GM stock was officially delisted.  The ticker symbol was changed to MTLQQ to reflect the fact that it’s now the stock of Motors Liquidation Company.  And it appears that investors are starting to understand that the stock is worthless – it’s dropped back down to about 50 cents per share.

The “new GM” officially came out of bankruptcy, and the “old GM” stock rose 38% yesterday.  That’s weird.  And very very dumb.  Here’s why.

When GM (stock ticker GM) declared bankruptcy, there was a small – very small – chance that stock shareholders MIGHT receive something for their shares.  When the government got involved and negotiated who would get what, that small chance disappeared.  The “old” GM stock is now traded under the ticker GMGMQ, and that’s what went up 38% yesterday.  The problem is that GMGMQ doesn’t have ANY assets, and when you buy it, you’re not buying anything except the stock certificate.

Here’s what GM’s investor relations page says:  General Motors Company (the “new GM”) currently has no publicly traded securities. Please note that none of the publicly owned stocks or bonds issued by the former General Motors Corporation (now renamed “Motors Liquidation Company”), including its common stock formerly traded on the New York Stock Exchange under the ticker symbol “GM”, are or will become securities of General Motors Company, which is an independent separate company.

In other words, the “new GM” is making it very clear that NONE of their old stock has anything whatsoever to do with the new company.  The old stock (and bonds) are not, and will not be transferred in any way, shape or form to the “new GM”.

And if that doesn’t make it clear enough, the homepage of the website of Motors Liquidation Company (which is the “old GM”) says: Management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios.

And just in case none of this is clear to the people who are still purchasing GMGMQ stock, the FAQ page of Motor Liquidation Company says:

Q. What will happen to my current stock and bond holdings? Will I receive General Motors Company stock?

A. All of the publicly owned stocks and bonds previously issued by General Motors Corporation are still securities of that company, which has been renamed “Motors Liquidation Company,” and will be treated in accordance with the provisions of the U.S. Bankruptcy Code and the rulings of the Bankruptcy court. None of Motors Liquidation Company’s publicly owned stocks or bonds (including the common stock that formerly traded on the NYSE under the ticker “GM”) are or will become securities of General Motors Company, which is an independent separate company.

So why are some investors bidding up the price of GMGMQ?  Simple – they’re idiots.  They heard that GM was coming out of bankruptcy, so they bought what they thought was GM stock.  It’s not, it’s Motors Liquidation Company stock, and (again, according to their FAQ) it has no value.

Both the “new GM” and the “old GM” (Motors Liquidation Company) state – in no uncertain terms – that the stock is worthless.  I don’t have a brokerage account that allows me to short stocks, but if I did, I’d short GMGMQ with everything I had in the account.  It’s the easiest money you’ll ever make.

BTW – The “new GM” doesn’t have any stock for sale.  It’s 100% owned by the US Government, the Canadian Government, and the UAW.  There MAY be an IPO of stock sometime next year, but you cannot buy into the company at this time.  Although everyone in the US and Canada has in fact already bout into the company, as our governments are now the owners.

gk

Share

One Response

  1. i would like to buy a crash test dummy, if there are any for sale please contact me. thank you, k. nichols

%d bloggers like this: