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TMFEditorsDesk (< 20)

GM's Shares Are Cheap!



July 01, 2009 – Comments (11)

Exactly one month ago, General Motors filed for bankruptcy court. My colleague Joe Magyer wrote about the affair on (read more here) and did not exactly mince words about the future value of GM common stock:

And what of GM's shares? I want to be crystal-clear about what GM's shares will be worth in very short order: Zero. Zilch. Nada. Zip. $0.00. Common shareholders are dead last on the totem pole of bankruptcy prioritization, which usually means they get nothing in a reorganization. If bankruptcy investing is new to you, I highly recommend this classic by fellow Fool Bill Mann: "When Companies Go Bankrupt."

Well, today, GM executives are saying the same thing. Check out this story from the AP. A few highlights:

GM said it has noticed continuing high trading volume in GM's common stock at prices in excess of $1.

"GM 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," the automaker said in a statement.

And this (which should have been the lede, methinks):

In over-the-counter trading Wednesday afternoon, GM shares were at around 96 cents.

If you have any thoughts about GM stock these days ... well, give Joe Magyer a close read.

-- Brian Richards (Disclosure: No stake in GM. But you probably suspected that.)

11 Comments – Post Your Own

#1) On July 01, 2009 at 4:06 PM, chk999 (99.96) wrote:

It might be worth it to buy a few GM shares and get the stock certificate mailed out to you. That will make a dandy souvenir in a nice frame.

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#2) On July 01, 2009 at 4:09 PM, SkinneeJ (28.68) wrote:

If that is entirely true, then why don't you short a few million dollars worth and when it goes to $0, you will be making some serious loot!!!

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#3) On July 01, 2009 at 4:24 PM, TMFEditorsDesk (< 20) wrote:

chk999, love the idea! I dream of a day when the stock certificate is selling more on eBay than it does on an exchange...oops, already there!

-Anand (no shares in GM, short in CAPS, though!)

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#4) On July 01, 2009 at 4:34 PM, TMFJake (95.06) wrote:

Reminds me of when JPM agreed to acquire Bear Stearns for $2.00 a share.  With BSC continued to trade at almost $7.00 per share, it seemed like a great big fat pitch. 

I closed my underperform with a 48% relative loss. 

GM is in a very different situation, but this isn't an ordinary bankruptcy either.  I think Joe's right, but I wouldn't put anything other than fun money on it....

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#5) On July 01, 2009 at 4:35 PM, TMFJake (95.06) wrote:

Buy GM share for $1 or less and sell the for $2 or more on eBay.  In short, GM is an easy double!!!!!

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#6) On July 01, 2009 at 4:55 PM, Varchild2008 (84.12) wrote:

Buy GM shares cause what else are you going to spend the savings you got with the "Cash for Clunkers" program?

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#7) On July 01, 2009 at 5:09 PM, Londamania (47.83) wrote:

SkinneeJ - you can't short GM in real life - no buyers.  All you can do is put the CAPS red thumb on it and get whatever CAPS points are left between the current price and zero. 

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#8) On July 01, 2009 at 5:15 PM, outoffocus (22.85) wrote:


You can't redthumb the GM ticker. Its no longer ratable.

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#9) On July 01, 2009 at 6:30 PM, chk999 (99.96) wrote:

TMFNewsDesk - that eBay seller has a lot of cool certificates. Thanks for the pointer!

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#10) On July 03, 2009 at 2:10 PM, TMFBrich (80.73) wrote:

I just read (a week late) this Mark Hulbert NY Times piece about buying shares of bankrupt companies. It's an interesting story. A sampling:

In any case, Professor Branch said in an interview, the odds are extremely low that G.M.’s stock will be higher when the company emerges from Chapter 11 than the 75 cents it fetched at the end of the day it filed for bankruptcy. He said that in just 14 of the 154 cases in the study, or less than 10 percent, would an investor have made money over the bankruptcy period.

 -- Brian (still no GM stake)

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#11) On January 29, 2010 at 9:17 PM, BrandonPaulChevy (< 20) wrote:

Well, it should be cheap because they are already bankruptped. I believe some of their employees sell cheap parts such as the Starter. I think they just bargain parts like this.

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