GM tells investors: Don't buy our stock

[Area52]

The automaker warns that common shareholders will be wiped out when it emerges from bankruptcy.
Posted by Charley Blaine @ MSN Money on Wednesday, July 1, 2009 8:51 PM

You don't see this very often, but General Motors (GMGMQ) issued one of the most ironic press releases in memory today.

It told investors to steer clear of its stock.

Almost always in a bankruptcy, the common shareholders lose their stakes because all other creditors get paid off first.

GM filed for Chapter 11 bankruptcy protection on June 1 in order to rebuild the company to better compete in a global market.

The automaker noted today that its shares had been trading above $1 since June 8 with pretty heavy volumes. It peaked on June 10 at $1.55.

The company repeated today 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."

Investors apparently heard the warning. The stock fell 16.7% to 91 cents.

This market is nuts. Or is it proof that it's being heavily manipulated?

 

[Area52]

Follow up. This should be on "believe or not".

Published: Friday, 10 Jul 2009 | 1:22 PM ET Text Size By: David Faber
CNBC Anchor and Reporter

I’ve noticed today that shares of GM [GMGMQ 1.15 0.313 (+37.4%) ], which have absolutely no value, are trading up 39% to well over $1 a share.

The stock no longer trades on the NYSE, but still trades over the counter.

It is typical to see shares of a bankrupt company continue to trade for some value, despite the highly likely outcome that those shares will have no value.

But, this is truly bizarre because GM has emerged from bankruptcy. These shares should not even exist any longer let alone trade for any value.

It seems likely that some unsophisticated investors, reading the headlines about GM’s emergence from bankruptcy, are buying its stock. The problem is that the old stock has no claim on the “new” GM and no value. It’s also possible that some investors, knowing that other investors would pile in today, were buying shares with the knowledge they can sell them to the clueless people who think they’re getting in on the “new” GM.

It may be a while until we see shares of the new GM.

The company’s CFO told our Phil Lebeau that an IPO could come at the earliest in the second quarter of next year.

We will see when issued market in those shares emerge well before an IPO, but that is also some time from now