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GM bankruptcy question?

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June 01, 2009 – Comments (3) | RELATED TICKERS: GM

As I understand it in this bankruptcy, "old GM" is gone and its assets legally sold to new corporation "new GM".

Also as I understand it "old GM" has lost about 35 billion over the last 5 years.

The question is; Who owns those losses and tax write-off? If it is "old GM" it is a 9 billion dollar tax write - off divided among 631 million "old GM" shares, or $14./share currently trading at $.75/share.

Second question; Could a company with profit, such as a Google, buy "old GM's" losses as a tax write-off from "old GM" making those shares worth a little more than $.75?

Or does "new GM" get the write-off included as an asset?

Just wondering how this works.

3 Comments – Post Your Own

#1) On June 01, 2009 at 11:27 PM, jatt22 (46.54) wrote:

 same  here  i  m not  a  pro  but  one  thing  i  duno  underrstand  either  when  gm already filed for bankruptcy how  it  was   still  trading  in stock exchange .

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#2) On June 01, 2009 at 11:47 PM, ChrisGraley (29.67) wrote:

Well I'm no expert, but I believe that normally that loss gets transferred to the bondholders in a bankruptcy. The play to make on that is to buy the debt during the bankruptcy proceedings like Lambert did with K-Mart. When ownership of the company transfers to the bond holders, so does tax advantage.

Now the problem with GM is that the bond holders got screwed! The government owns GM and they don't need the write-off. They might pass it off to the union, but I doubt it.

I'm guessing that the US is looking for a suiter. They'll throw in the tax advantage into the deal.

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#3) On June 02, 2009 at 7:27 AM, devoish (96.51) wrote:

Now the problem with GM is that the bond holders got screwed! The government owns GM and they don't need the write-off. They might pass it off to the union, but I doubt it.

If The government owns GM and they don't need the write-off then that would suggest that the write-off is now owned by "New GM", and shared proportionately between "New GM's" owners, the USA, Canada, Bondholders, and Union VEBA Fund.

I also read repeatedly where the common "shareholders" are expected to be wiped out, which also suggests they do not get a 9 billion write-off to sell. I was looking to find value where no-one else seems to see it, but it does not seem to be there.

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