Brutto

GM Common Stock Is Worth More than You Think

Nice summary, which should be linked to all the other sites discussing the same dumb/greedy/ignorant question. (MarketWatch et. al.)

The sort of "investors" stumbling into GM stock and bonds at this stage are probably the same guys still trying to flip Florida condos ....


On May 30 02:02 PM SeattleGoldMiner wrote:

> 1.) GM shares will continue to trade until the company EMERGES from
> Chapter 11.
> In all likelihood they will be delisted by the NYSE sometime shortly
> after they file Chapter 11 and trade on the pink sheets.
> 2.) While in Chapter 11, whether the bondholders buy into the new
> deal or not, GM will continue to operate, almost as normal, while
> it begins to implement the changes that the government and consultants
> have suggested are necessary to perhaps be successful in the future.
>
> 3.) The Chapter 11 will take anywhere from 3 months to 18 months
> to be completely resolved and when it is resolved the company will
> EMERGE and ALL OF THE CURRENT SHARES WILL BE CANCELLED.
> 4.) There will be nothing given in return for the cancelled shares.
>
> 5.) If someone is short the stock there will be no need for them
> to "cover" their short position, only file copies of the reorganization
> plan with their broker and any margin held against the position will
> be released (this is called a terminal short.)
> 6.) There will be tax due for the profits on the short position,
> even if never formally covered by a trade. The profit will be deemed
> to have occurred on the day the company emerges and the shares are
> cancelled.
> 7.) Between now and then the stock will continue to trade and may
> spike up and down for a variety of reasons such as:
> a.) People who have held for a long time figuring, "how much more
> can I lose" and thus NOT selling. The obvious answer is, since the
> stock WILL be cancelled, that they can lose whatever their stock
> is worth when they decide to NOT sell it.
> b.) People who DO cover their short positions and are willing to
> forego the remaining drop to zero, so that they can free up their
> collateral margin, which will create some buying.
> c.) Naive people who do not understand that what is happening to
> the company has no bearing any more on the value of the stock in
> the future. So even if sales fo up 30% while the company is in Chapter
> 11, the stock is still cancelled when they emerge. The reason for
> this is that until and unless the company can make all claims against
> it 100% whole (bondholders, secured creditors, trade creditors, union
> health fund etc.) Bankruptcy law does not allow for anything to common
> shareholders. In rare instances there is either enough in the company
> to leave something over for common shareholders (usually if a company
> files to avoid litigation) or to shorten the process (as they are
> currently trying to do with the bondholders) the shareholders are
> thrown a "bone" so they do not add more legal fees or delay things.
> That "bone"....if the creditors are not made whole, may not be more
> than an "out of the money" warrant to buy stock in the "new" company
> at a price which would make the creditors whole if the stock ever
> reached it and the creditors have taken stock for all or part of
> their claims.
> d.) Hypesters and day traders who attempt to take advantage of a,
> b and c above in order to create a quick profit, or escape from an
> ill-advised position they took before the filing.
> e.) Momentum copycats who say "Gee, the stock is rising, something
> must be happening." The response to that is to not believe your neighbor
> can really fly if you see him jumping off the roof!!

Cramer's Stop Trading! Dow Doomsday Scenario (3/6/09)

What a bunch of random rubbish, e.g.:

1. "Chevron has bottomed, but if oil goes to $33 it will see a rapid drop..."

2."Exxon stays at $56 because I'm a bull on oil"

Now that Cramer is talking down weaklings like Boeing, Coke, Disney, JNJ, IBM, Intel, maybe this is the contrarian indicator we've been waiting for....