Marketplace Scratch Pad

I’d stop trading our stock if I were you

Scott Jagow Jul 1, 2009

How often does a public company issue a press release telling investors not to buy their stock? GM did it today. It’s actually the second time in a month that GM has warned people — proceed at your own risk.

Here’s the statement in full:

GM management has noticed the 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. Stockholders of a company in chapter 11 generally receive value only if all claims of the company’s secured and unsecured creditors are fully satisfied. In this case, GM management strongly believes all such claims will not be fully satisfied, leading to its conclusion that GM common stock will have no value.

I guess GM is just CTA, so that later on, investors who might think of suing won’t have a leg to stand on. Hey, we told you the stock wouldn’t be worth anything, but nooooo, you wouldn’t listen!

By the way, today was day 2 of the bankruptcy hearing. As advertised, GM’s bankruptcy is moving at lightning speed. The government has set a deadline of July 10th for the restructuring plan to be completed.

As far as the value of the government’s stake in GM, the Washington Post says GM’s stock would have to rise to unprecedented levels for the taxpayers to be made whole:

“We have certainly looked at scenarios where, over time, a very substantial portion and potentially all of the taxpayer investment in General Motors will be returned,” Ron Bloom, a senior adviser to the administration’s auto task force, told a Senate committee earlier this month. “But I certainly by no means would say that I am highly confident that that will occur.”

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