GM Stock After BK

At this point in time, there is little to no doubt that GM will be filing Monday, June, 1, 2009.

What happen after that? Common shareholders will end up with nothing simply put. Although the real answer is "it depends".

If you own GM as it walks into Chapter 11, you should know that, generally, companies that file under Chapter 11 do not meet the listing standards of the major stock exchanges, such as Nasdaq or the New York Stock Exchange, but their shares may continue to trade on either the OTCBB or the Pink Sheets. Secondly, the bankruptcy court may determine that the current stockholders get nothing. That said, you as investors (shareholders), should look at the fact because judges think like you (reasonable and prudent). The facts involves GM's debts, capitals, its counter parties, and the Government's interests in providing additional cash injection (with condition and ownership interests). Keep in mind, bondholders, creditors, Governments, UWA are taking equity, what does that leave to the common shareholders?

Given the fact, current the Government as well as GM has no incentive to protect the common equity holders (that's what you buy into) compares to the others. So, whether GM emerges from BK like Chrysler has little to no reason be part of the analysis in my personal opinion.

Further, assume GM emerges while preserving current shareholder's interest, it would need more capitals. That means more borrowing, and more issuance of stock, further translate into negative equity and/or dilution.

Assume GM does not file BK, then you should go back to the fundamental analysis - not much to own here, is it?!.

I have no comment for those making a short play on GM, it's gamble. For those get long on GM, it's important to understand, and foresee the outcome of BK proceeding and possible consequence of your right. Cheers and good luck.

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• Thanks for sharing -10203040- ♀ (91 bytes) () 05/28/2009 postreply 16:30:49