GM Is Worth Less than You Think

In an article written on Friday, I gave my opinion that GM common stock would wind up with the tax loss which GM accumulated over the last 3 years.

There were over 100 comments, and while those comments offered varied explanations of what the tax loss was worth and who would own it post bankruptcy, almost all of these commentators feel that the loss will not benefit the existing GM common shareholders.

I will yield to them.

I continue to recommend that holders of GM common stock (GMGMQ) sell it and buy the bonds which are trading around 12-13 cents per dollar of par. Bond buyers can now buy $1000 par bonds flat, that is without accrued interest. Check that with your broker before confirming any order.

The value of the GMGMQ mostly represents what short sellers are willing to pay to cover their short position. Maintaining the short position is very costly.

If there was going to be a meaningful short squeeze it would probably have taken place Monday. That is not a reason to hold the stock.

Disclosure: No position in any General Motors securities.

Comments

[joeisright:]

Good job you basically owed up.

Jun 03 10:55 AM

[Mad Hedge F...:]

Less than zero? The fat lady finally sang. General Motors (GM) is gone at last. Don’t look at the share price, which now trades in pennies, down from $90. Look at the labor force, which has shrunk from 360,000 to 39,000 on its way to 18,000. I sat at Ralph Nader’s knee (because there were no chairs) 40 years ago, who wore his unfashionable trademark white shirt and pencil thin tie. He was fresh from the runaway success of his book Unsafe at Any Speed, which castigated GM for its Corvair, which had the unfortunate tendency to explode when hit from behind. Even then he was predicting the demise of GM. Companies that recklessly kill off their customers and produce inferior products at high prices can’t last, he said. Fuel efficiency and the environment came later. Many people considered him a communist then, for bashing GM was considered unpatriotic by most and treasonable by some. No doubt J. Edgar Hoover’s FBI was following his every move. I think that Obama should now make Nader a director of GM, along with that other GM hater, Michael Moore.

Jun 03 11:39 AM

[hallywood:]

It appears that a 'naked short' squeeze is on. Traders have turned over the entire float in the last 4 days during which GM has: filed for Chap 11, been kicked out of the Dow and S&P, delisted from the NYSE and the stock is up today? Managment and Barry O's talking heads have all stated on the record the the common is worthless. When will this POS finally die?

Jun 04 03:01 PM

[JPPennypacker:]

Thank you Gerry for both of your GM articles. They opened the door for discussion about several interesting aspects of corporate bankruptcy.

Jun 06 03:30 PM