GM: This Stock Is Worthless

Here’s a good one: What do Confederate dollars, Monopoly money, and the old equity of General Motors (OTC: GMGMQ.PK) have in common?

They’re all worthless!
Really, folks, this is not a drill. Your old GM shares -- the ones stuffed under your mattress, the ones in your brokerage account, and the ones you’re seeing quoted on Yahoo! Finance -- are truly worthless. Don’t get caught up in the excitement that GM emerged from bankruptcy court today. The shares of old GM trading on the over-the-counter market have literally no claim on the assets or earnings of the newly reborn General Motors.

Again, this isn’t a drill, fancy, or conjecture. Consider this press release from GM last week:

GM management has noticed the continuing high trading volume in GM's common stock at prices in excess of $1. GM management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios. Stockholders of a company in chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In this case, GM management strongly believes all such claims will not be fully satisfied, leading to its conclusion that GM common stock will have no value. [Emphasis added.]

It doesn’t get much more black and white than a company’s own management telling you that its shares will soon be rendered worthless. In case you missed the above memo, though, consider the following comment now on GM’s website:

General Motors Company (the "new GM") currently has no publicly traded securities. Please note that none of the publicly owned stocks or bonds issued by the former General Motors Corporation (now renamed "Motors Liquidation Company"), including its common stock formerly traded on the New York Stock Exchange under the ticker symbol "GM", are or will become securities of General Motors Company, which is an independent separate company.

That’s to say, the shares of the old GM you might own have no relation whatsoever to the GM that just emerged from bankruptcy. They are completely separate corporate entities.

Sadly, it seems many, many folks missed this memo -- these old certificates are trading up 40%. Barring an incredible twist of fate, it is almost unfathomable that someone buying these stubs today will end up not losing their entire investment, let alone make a profit.

The endgame
If you’re able to sell your shares of GM, I (clearly) would recommend doing so before you lose the chance. You’re not hurting America, GM, or anyone else by selling. In fact, the only person who loses out if you dump your worthless shares is the person ill-informed enough to take them off your hands.

But what if you’re dead-set on investing in the “new GM”? You’ll have to invest in either Ford (NYSE: F  ) , Toyota Motor (NYSE: TM  ) , Honda Motor (NYSE: HMC  ) , or Nissan Motor (Nasdaq: NSANY  ) to get your automaker fix for the time being, as the new GM likely won’t go public until at least next year.

To reiterate ...
The new GM will be leaner and far more stable than its predecessor, but the shares currently trading under the GM banner are completely unrelated to that enterprise. This game of musical chairs is about to stop for traders of GM’s old equity. Don’t be the fool caught standing.  

For related Foolishness:

Joe Magyer has no interest, long or short, in any of the companies mentioned in this article. Nissan Motor is a Motley Fool Global Gains pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (32) | Recommend This Article (127)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 10, 2009, at 3:42 PM, bntntd wrote:

    I want a stock certificate from "old" GM for the same reason I want Confederate dollars and other things that have "gone with the wind". Is that any longer possible?

  • Report this Comment On July 10, 2009, at 4:24 PM, plange01 wrote:

    "GM is worthless" this company is going right back into bankruptcy for good! the way this trash treated its own dealers,cheated accident victims,its crediters and oh yes stockholders! with the help of the government goes beyond words..the best way to deal with this is to simply buy your car elsewhere..it can now be truthfully said that foreign automakers are now more american than general motors!

  • Report this Comment On July 10, 2009, at 4:47 PM, NoMoeMoney wrote:

    " these old certificates are trading up 40%'

    Muuuhahahaaaaaaaaa, thats funny. Now come on you silly people (says GM) we really DO mean they are worthless.

  • Report this Comment On July 10, 2009, at 5:30 PM, ecooper12 wrote:

    Will someone please help me understand why trading in the old GM stock wasn't suspended at some point, e.g., when they filed? Just curious as I was smart enough not to own any of this beast. TIA.

  • Report this Comment On July 10, 2009, at 5:37 PM, shamed wrote:

    What if you bought shares this morning after they came out of bankruptsy under ticker symbol GMGGQ. I thought I was smarter than that.

  • Report this Comment On July 10, 2009, at 5:49 PM, Rostripes wrote:

    Well the "old certificate " will be worth more than the "new" govt. car company to me. The new company may be leaner for sure but it won't be more stable - it had a long history of paying a middle class in America

    a living wage and giving life to this country. The govt. car company has about 65 years to provide America growth before I'll even compare it to the "old" GM.

    Besides - who would you buy a car from the govt? or Ford or one of the surviving new companies ....

    Ol'Henry knew to sell cars to people and pay them a wage that they could afford to buy one.

  • Report this Comment On July 10, 2009, at 5:53 PM, bellamyj wrote:

    Is it possible to short GMGMQ shares? It seems like a perfect chance for a short that you'd never have to cover. But I assume there's some reason everyone's not out doing it.

  • Report this Comment On July 10, 2009, at 7:00 PM, Proctoid90 wrote:

    so much for efficient market theory

  • Report this Comment On July 10, 2009, at 9:51 PM, deadaphids wrote:

    bellamyj's question occurred to me as well -- if i had shorted the shares at a dollar or so (or at any price), actually BELIEVING management (and the Fool) when they said it was going to be worthless -- could I not close out the short with shares when they're officially declared (or are finally listed as) worthless? Could I not still do this as long as GMGMQ shares are being traded? Please respond with an additional Comment. Thanks!

  • Report this Comment On July 11, 2009, at 2:15 AM, TheMaskedMarvel wrote:

    Joe, Joe, Joe.... GM.pk will explode to three dollars a share when all of the debts are paid off. You're just making a safe guess as to what will happen. There wouldn't be this much trading if there were no chance of a pay-off.

  • Report this Comment On July 11, 2009, at 2:42 AM, ati2ud wrote:

    -masked marvel-

    are you reading something I am not? Please allow me to repost what was said: "General Motors Company (the "new GM") currently has no publicly traded securities. Please note that none of the publicly owned stocks or bonds issued by the former General Motors Corporation (now renamed "Motors Liquidation Company"), including its common stock formerly traded on the New York Stock Exchange under the ticker symbol "GM", are or will become securities of General Motors Company, which is an independent separate company." there is nothing that can be paid, those shares are not part of the new GM and never will be again.

  • Report this Comment On July 11, 2009, at 6:22 AM, xetn wrote:

    You omitted the value of the dollar, which will become as worthless as GM or confederate dollars or Zimbabwe dollars if the FED keeps printing money out of thin air and the banks start lending again.

  • Report this Comment On July 11, 2009, at 10:10 AM, jesse2159 wrote:

    The New GM stock looks just like the old GM stock,....the United States dollar bill. We all have shares, like it or not.

    So let's not try to put a value on it. I'd like to sleep tonight.

  • Report this Comment On July 11, 2009, at 10:23 AM, TMFGebinr wrote:

    ecooper and shamed,

    If you bought shares, you should probably sell them for what you can get. As Joe points out, management itself is saying that those shares (now of Motors Liquidation, not GM) are scrap paper. Eat your loss, learn from it (don't jump before understanding what's going on), and move on.

    As for shares being allowed to trade, sure. Some people play on the ignorance of others, others see possible arbitrage opportunities, others gamble on the outcome of the bankruptcy proceedings. The shares are not canceled until either the company comes out of bankruptcy and is reorganized, usually including issuing new shares and canceling old ones (and note, Motors Liquidation will not come out) or until the company is liquidated.

    As for "there wouldn't be this much trading if there were no chance of a pay-off," well, the payoff is for those selling the shares at the high prices. With such a large amount of negative equity, common shareholders of Motors Liquidation will (not "might") end up with nothing.

    Cheers,

    Jim

  • Report this Comment On July 11, 2009, at 11:30 AM, ezed1 wrote:

    I'm going to give a little more credit to the "Unfools" who are stil buying the stock for Liquidation Motors. Many of these shares may be being bought as "Beanie Babies" i.e. the hope that the worthless piece of paper may be worth something at a flea market some day. Then of course Beanie Babies never put anyone's kid through college either.

  • Report this Comment On July 11, 2009, at 11:34 AM, plange01 wrote:

    stock worthless? GM is worthless .this company is a disgrace and will be sent straight back into bankruptcy for good....

  • Report this Comment On July 11, 2009, at 11:43 AM, radred68 wrote:

    though the old GM may be 48B in debt, the new GM will not be in debt as I see it...other than the debt to the people of the US, as we(collectively), like it or not, own 60% of it...Stocks for new GM will sell, we will buy and the debt (real, made up or resolved) will be liquidated by the same people that were hurt by it....US, the US taxpayers.

  • Report this Comment On July 11, 2009, at 3:17 PM, Ronancohen wrote:

    This all seems so obvious, and yet. . . I bought puts on GM stock before it went bankrupt. I paid $1.60 for the puts and they will be worth $2.00 if GM stock is valued at 0. So far I have lost far more than I ever could gain. My broker says I can sell my puts but I can't buy more. Curious. The market is manipulated. I don't yet understand who is in control. There is no way I would buy GMGMQ, but I don't the fact that no-one can short it creates the imbalance that is causing this stock to trade for more than $1B. This is absurd and yet, it is happening. How many other things out there are equally absurd.

  • Report this Comment On July 11, 2009, at 8:03 PM, thisislabor wrote:

    Proctoid90 said: "so much for efficient market theory"

  • Report this Comment On July 11, 2009, at 8:43 PM, thisislabor wrote:

    GM's Pension Perils was a really good article btw. So is that what people mean when they say that all the articles you guys use to write were so much more informative, or was that article from a different section//class//grouping//whatever then what I normally get in my email box?

    I would pay for the education because what I was learning at ASU was nearly as informative.

  • Report this Comment On July 11, 2009, at 8:43 PM, thisislabor wrote:

    wasn't*

  • Report this Comment On July 12, 2009, at 12:53 PM, jimmy427 wrote:

    confederate dollars are not worthless,in good condition they are worth much more than a gm stock certificate.To a collector some of those dollars are worth much more than their face value.

  • Report this Comment On July 13, 2009, at 9:48 AM, BMFPitt wrote:

    It probably wouldn't be worth buying puts because you'd probably lose all your profits in the transaction costs.

    If you have a small amount of GM stock, it might be more worth it to just get the certificates and eBay them.

    I have a $100 trillion Zimbabwe dollar bill in my wallet. I like to have it on hand when I get into discussions about our current inflationary policy.

  • Report this Comment On July 13, 2009, at 10:55 AM, sgbnc wrote:

    Well, the MF article came too late for me. I bought and sold on Friday, made some good profit, then bought again (11,000 shares) at about 11:42. Never did see them stop trading. Ouch, now what? Where can I get some Zimabwian dollars?

  • Report this Comment On July 15, 2009, at 2:41 PM, plange01 wrote:

    GM the company is worthless. this disgrace needs to continue selling assets as fast as possible and prepare to close for good...

  • Report this Comment On July 15, 2009, at 4:24 PM, BMFPitt wrote:

    You can get Zimbabwe dollars on eBay

  • Report this Comment On July 16, 2009, at 1:39 PM, majordm wrote:

    ok, question:

    why are you trumpeting this now? were you not sure until now that the shares were dead? how common is it for companies to keep the old shares after coming out of BK? if they NEVER do, why is this blaring news?

  • Report this Comment On July 17, 2009, at 7:25 PM, mayhem4masses wrote:

    They went in with 48 B in debt, they will come out debt free. By the way, GMGMQ does not exsist anymore, the name of the company is Motors Liquidation company, and they trade under MTLQQ and some how were trading up 17% today. They have become a penny stock company, nothing more, nothing less, so lets just stop talking about them.

  • Report this Comment On July 18, 2009, at 2:13 AM, Libraman99999 wrote:

    I am one of novice "foolish: investors. With about loss of half of my portfolio, I thought I could recoup with new bargains like the GMGMQ and now it has changed to MTLQQ. I may have lost just about everything on this one. Maybe I should not invest at all anymore. Comments?

  • Report this Comment On July 23, 2009, at 3:14 PM, FAS29 wrote:

    I received a number of GM preferred stock but have no idea if they are worthless? Anyone know?

    Thanks

  • Report this Comment On August 04, 2009, at 11:31 AM, summer08 wrote:

    How does one go about selling GM stock? I know it is worthless but if someone wants it for whatever reason I would like to sell it just to take my tax loss.

    Who does one contact? I inherited the stock from my mother and am not an experienced stock trader, as you can see. summero8

  • Report this Comment On August 11, 2009, at 11:58 AM, TeeTimeKidd wrote:

    Worthless people are saying? The stock has double anyone who bought it for 50 cents a few days ago. Why are people still saying worthless? The government will not let them go under seeing how much they have spent!! I would wait until it goes back to the 50 cent range and BUY BUY BUY!!!

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