Dumb investors in GMGMQ.PK (the old General Motor)
Posted by Frugal on July 10th, 2009
Sorry to be so blunt. But I really really hope that my post can save some of those hopeless souls.
There is simply no values in GMGMQ.PK. Yes, the new GM is emerging out of bankruptcy, but the old shareholders won’t be getting anything. The new GM has been severed from the old bankrupt GM in the bankruptcy court. Whatever (government) money is going into the new GM, not the old GM.
Sell while you still can.
I tried to short sell the GMGMQ.PK call options again, and the market makers are NO LONGER accepting such orders. ALL options for ALL dates are in liquidation mode ONLY. You can only close the contracts. That means just today, there are 18 million dumb money went into chasing GMGMQ.PK.
Boy, if there are people so dumb, I guess this stock market in general has a LONG WAY to fall.
Please wake up! Anyone thinks that one can double their money in GMGMQ stock (or Citibank/AIG stock) is just nuts. If there exists such real opportunities, do you think trillions of capital around the world will let you have it?
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July 14th, 2009 at 12:54 pm
Not sure that these are individual investors buying old GM, but rather “investment” firms who are “investing” for retirement funds, pension funds, and endowment funds and trusts.
Reason being these “investment” firm traders are making their money on the fees and commissions associated with the trades.
Whether the particular fund (retirement/pension/endowment/trusts) gets screwed or not means nothing to these guys….its all about making money off of the trade.
August 24th, 2009 at 9:39 am
Are all the stocks of the companies in reorganization worthless? I read somewhere the old GM stocks will be worth zero eventually. What about General Growth properties? It’s trading under GGWPQ.PK. Will it be worthless too eventually or is it different?
September 3rd, 2009 at 7:52 pm
Stephen,
General Growth will may have some small remaining value (but I have not done much due diligence). But I will not hold the bankrupt companies shares in general. Usually, secure bondholders will come out much ahead of everyone else. Shareholders will only get the leftover (if any). If I want to hold thru my position in the bankrupt company, I will try to switch the shares into bonds (secure, preferably). At the end, bondholders will probably get an equity conversion (which is stock in the new company) once the company emerges out of bankruptcy, and/or some cash after partial/total liquidation.
In any case, it is often VERY HARD to evaluate the worth of the bankrupt company, relative to other public companies. One has to be extremely thorough, going thru the entire balance sheet, re-evaluating every item in a liquidated mode. You will need to be as sharp as the bankruptcy judge to get a correct valuation.
Good luck.
September 4th, 2009 at 8:49 am
Thank you for answering my question Frugal. I don’t own any General Growth stock but one of my friends bought some recently and I was worried a bit.
September 7th, 2009 at 3:15 pm
I wrote about this on my blog, Stocks For All Seasons. It’s amazing that a zombie company like Motors Liquidation Company can trade over 34 million shares per day. It’s completely worthless, it just a vehicle for speculation, pure and simple. Still, there are those who still preach that the market is rational.
October 7th, 2009 at 3:02 pm
“Please wake up! Anyone thinks that one can double their money in GMGMQ stock (or Citibank/AIG stock)”
Citi had doubled, what do you say to that?