GM details plans to wipe out current shareholders

[UpInArms]

Source: Reuters

General Motors Corp (GM.N) on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM's shares could be worthless whether the company restructures out of court or in bankruptcy.

<snip>

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM's existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

Read more: http://www.reuters.com/article/bondsNews/idUSN0548672220090505?sp=true

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why would anyone want to own stock in such a dishonest corporation?

[madrchsod]

1. well it`s not the only company or should i say....

the men behind the curtain...http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=446086&mesg_id=446086

that`s the problem with posting at daybreak....no one noticed this today....

by the way the gm stock is pegged at 1ct per share. now that is a classic definition of a penny stock

[Kolesar]

5. The night they drove old Detroit down

Somebody in the Daily Stock Market Watch thread sussed this out a few weeks ago.

[imdjh]

2. I guess the Germans were right

I can't remember who it was in Germany, but it was a headline one day that (german entity) had revise the forecast (whatever that is called) to a one year target of "zero".

So, the next question would be- did the unions and other pension plans dump the GM stock when they had the chance or is GM going to take down the workers along with the stock market players?

Damn, I knew when it hit $1 I should have bought all I could and then sold at $3. But I simply don't have the guts for that sort of gamble.

[quiller4]

4. This applies to common stock most of the stock in pension

plans is non-voting preferred stock not affected by offering of additional shares or common.

[w4rma]

3. Good. (nt)

[Javaman]

6. LOL and just last night I saw a GM commercial offering 100 shares of GM stock with each new purchase

:rofl:

sure, take the toilet paper!!! We'll print more!!!

simply amazing.

[Yupster]

7. In a bankruptcy

the stockholders are last in line so it's no surprise they'd be wiped out.

The offer GM has bondholders currently voting on to avoid bankruptcy is a little more odd.

The offer is

Bondholders wipe out $ 27 billion in debts for 10 % of company stock.
Government forgives $ 10 billion in debts for 50 % of the stock.
UAW forgives $ 10 billion in debts for 39 % of the stock.
Current stockholders end up with 1 % of the stock.

You can see why the bondholders are upset. GM has 100,000 individual bondholders who are now voting on this proposal. Expect a solid no vote.

[Ohio Joe]

8. They did this when I worked for Ames Dept. Stores

Ames went into chapter 11 the day I started with them. A few years later, when they came out of chapter 11 (the first time), they announced at the stock market opening that the plan they came up with (with gov approval), was to void all existing stock and issue new stock to creditors to pay off their debt. The stock was valued around the $10 mark at the time. At noon, they made the same announcement in the home office and to employees at the stores. Now understand, for years and years before, employee stock purchasing program was what many used for their retirement. When employees were told at noon, everyone went to dump their stock, only to find it was now worth about $0.25 a share. I've never seen so many people all crying at once, their retirement pretty much wiped out. It was pretty brutal.