A Consensus Forming That Existing General Motors (GM) Common Shares Are Worthless
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On Friday, it become very apparent to us that the common equity in General Motors (NYSE: GM) will become worthless. We advised shareholders of GM that they have 60 days to sell at whatever price they can. Despite this warning and details from the Treasury's term-sheet for GM, shares of GM closed up nearly 23%. Absolutely incredible!
Today, Credit Suisse is making a similar case. The firm downgraded GM from Neutral to Underperform and cut the price target to $1, saying the U.S. bailout will mean the complete or near-complete elimination of the existing GM equity. The firm cut their price target from $2 to $1.
Credit Suisse said, over the next two months, as bondholders, union representatives and the company management meet to hammer out concessions, they think it will become increasingly clear that the enormous sacrifice of value on the part of the union and bondholders will require the complete or near-complete elimination of the existing GM equity.
We made the case that because GM will have to reduce their public indebtedness by not less than two-thirds through conversion of existing public debt into equity or debt (a "Bond Exchange") and other appropriate means, there will be little if anything left for the shareholders. With $36 billion in long-term debt (plus billions in other liabilities) and a current market cap of just $2.5 billion, it means that current GM common share holders have to be wiped-out.
Maybe GM shareholders will finally get the point.
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Comments
General Electric SELL!!!!
General Electric is heavily unionized Boeing ,too, Du Pont , 3M etc they are heaviliy unionzed .. they will slowly and surley wipe shareholders out!
Just Walk Away from Unions!!
Unions is in decline but unions is wiping out shareholders even faster!! Just dump unionized stocks!! NOW!!!! Unions will get the point!!
Unions Do Not Care About Shareholders
Unions always wipe out shareholders every time... Shareholders has no clout,,,,When will shareholders ever learn??? start selling heavily unionized stocks now!!! before it is too late...
GM stock
At what point is there no hope of growth? All these money numbers being thrown around are unreal. We'll see what happens down the road. Why bother selling when you've already lost so much unless of course you have thousands of shares but even then I don't trust anyone's motives.
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GM stock
What? on Jan 3, 2009 09:57 PMpublic debt into equity (a "Bond Exchange") What exactly does this mean? And is it definite? Did the President elect mention it?