Dear General Motors
Breathe. C'mon, deep breaths. There you go.
I know you've seen a lot. You've witnessed superior foreign operators Toyota
Trust me, I know this has been tough -- I received your hate mail. Those nasty bondholders said no to a debt-to-stock swap that would have helped GM avoid bankruptcy court. And yesterday, I even went so far as to tell you that your shares were on the brink of becoming worthless and that you should sell immediately.
But what of today's news? Sloppy reporting and a less-than-crystal-clear GM 8-K filing have contributed to a torrent of ill-formed conclusions, jerking GM's shares to and fro. But what is actually happening? Let's review.
Here's what we definitively know. Again, I recommend reviewing the 8-K filing if you're a GM shareholder.
- If GM enters bankruptcy proceedings -- which I see no avenue to avoid, and Bloomberg is reporting as being on the horizon -- the U.S. Treasury will own 72.5% of shares in the "New GM." Seventeen and one-half percent will be owned by a new voluntary employee beneficiary association (VEBA) for GM employees, and 10% will go to "Old GM" investors, which the 8-K implies as being GM's debtholders.
- The same group of stubborn debtholders who pooh-poohed the previous "offer" have accepted the terms of this one.
- There is no direct mention of current GM shareholders owning any of a new, post-bankruptcy GM. Presumably that means current shareholders will be wiped out entirely upon the company's restructuring.
- Seeking clarity on that last point, I've lobbed in a call to GM's investor relationships department, and they are currently working through my request for clarification. At the time of publication of this article, however, I'm still waiting for a response.
Frankly, I'm flabbergasted that GM's shares are trading for anything more than pennies apiece. Again, let's review the possible outcomes:
Overwhelmingly most likely: GM files for Chapter 11 protection within the next week, and current shareholders are completely wiped out.
Possible, but unlikely: GM files for Chapter 11, and current shareholders keep some slices of pie, though likely at only a fraction of their current value.
Deeply, seriously, incredibly unlikely: GM avoids bankruptcy, though current shareholders are diluted so many times over so as to render their investments still close to worthless.
From rumors to hard news to common sense, every sign points to a GM bankruptcy being imminent. And, again, that almost certainly equates to a total loss on GM's shares.
Some of you might be thinking that hanging onto your GM shares makes sense. You've lost practically everything on them already, you say, and they might pop if GM somehow avoids bankruptcy.
If you're honestly thinking that, please, get a grip. You can sell your shares for more than a dollar right now. More likely than not, they'll be worth $0.00 within months. As Steve Miller would say, take the money and run.
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