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GM Closes At $1.92 – Whaaa…???

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May 21, 2009 – Comments (9) | RELATED TICKERS: GM

I was watching NBR Wed night. GM had closed at a buck and a half, up about a dime. The journalist opined “I don’t get it”. Well, neither do I.

 

GM, if all goes according to plan, will issue 60B (yes, that is billion with a B) shares, diluting current stockholders out of existence. He calculated that a share of GM would then be worth $0.01; yes, that is correct: 1¢, one penny, one cent. If you go to the drugstore and there is a gumball machine that takes nickels, you will need 5 shares of GM to buy one gumball. Today was even worse: it closed up about 2 quarters of pocket change per share.

 

So, this is my question: If you are buying GM at 2 bucks a share,

Please: TELL ME WHY???

 

OK, perhaps a more apropos question: if GM is still in your Fool portfolio with a green thumbs up, tell me: why haven’t you ended your pick???

9 Comments – Post Your Own

#1) On May 21, 2009 at 9:49 PM, Imperial1964 (97.77) wrote:

"If you are buying GM at 2 bucks a share, Please: TELL ME WHY???"

If I were buying GM at 2 bucks/share I would be covering a short position.

But I don't put my money where the government is meddling.  If they start meddling I pull my money out.  The government is mostly good at screwing people.  Some people bet with the government and some against it.  I try to avoid it.

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#2) On May 21, 2009 at 9:54 PM, ChrisGraley (29.72) wrote:

The government is pumping the stock temporarily while GM executives dump shares. It was part of the deal so they wouldn't raise a stink about other shareholders getting screwed while the union owns the business they tried to kill.

Hold your shares and wait, the government will have to unwind their shares soon enough.

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#3) On May 21, 2009 at 10:02 PM, devoish (98.66) wrote:

Chris,

Where did the Government pump the stock? They made it clear at xler that bankruptcies are back on the table in this administration. Some hedgey is probably trying to cut their losses more likely.

I jumped in and red-thumbed it when became ratable, surprised I was getting this chance again, now it is $.40 higher?

ok.

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#4) On May 21, 2009 at 10:05 PM, FreeTruth (< 20) wrote:

Chris, why would we hold our shares, I intend to unload all of my in money $2 call options tomorrow. As to the original questions posed in this post, I believe that it has a lot to do with momentum, the RSI  was approaching 100 at close and it was drawing everyone in. Clearly, this is not sustainable.

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#5) On May 21, 2009 at 10:18 PM, ChrisGraley (29.72) wrote:

devoish they just pumped it enough to let the executives bail.

GS and the Presidents working group have been pumping stocks all over the place. The GM thing didn't take much effort.

FreeTruth I was talking to the bears. Bulls should sell! sell! sell!  Congrats on the lottery ticket!

Now that I look at my post, I did say shares.  Sorry for misleading you, I'm an idiot.

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#6) On May 21, 2009 at 10:39 PM, RootnToot (29.94) wrote:

True it does not make sense, but then why should GM be any different!? CGs opinion makes as much sense as any.

Things that make you go hmmm.....

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#7) On May 21, 2009 at 10:55 PM, ChrisGraley (29.72) wrote:

If you look at the last couple of weeks, execs have been dumping shares. Now since reports only have to be made when they initiate the sale, and nobody in their right mind is buying GM right now, they just put it up for sale higher than market price. The government has GS hold on to the orders and then starts buying through GS to drive up the price. Since they are using GS on both ends of the trade, they can avoid other market makers and only have to buy GM exec stock. They buy a very minor amount of stock with other market makers to make it look legit. The shorts taht have to cover tomorrow make up the rest of the ground.

Seriously, this week alone, just 3 execs have dumped 200,000 shares on the market. Does anyone think that a rational market would respond by going up?

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#8) On May 21, 2009 at 11:28 PM, Seano67 (65.35) wrote:

Great point, Chris. I would not be the least bit shocked to find that this movement in GM stock is being enirely manipulated, and your thesis is a very plausible one. I've lost a lot of confidence in the integrity of our market system over the past 6-8 months or so, and I have absolutely no doubt but that the US government has got their hands in much of this manipulation. God only knows where and what all they're up to, but they've got their fingerprints all over the place.

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#9) On May 22, 2009 at 12:51 AM, checklist34 (99.69) wrote:

sadly, i think its individual investors thinking along peter lynches chrysler in the 80s logic...

"gm will never go broke, never be allowed to go broke"

if i was to take a position today it would be short the $1 calls.  because no matter what, if they dilute as much as is discussed or if they go bk, $1 is a hell of a stretch for the value of these shares

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