11 June 2009
NEW YORK (AP) -- General Motors Corp. shares tumbled in over-the-counter trading Thursday after the automaker said that it is "highly unlikely" that its shareholders will be able to recover any of their investments when the company emerges from bankruptcy protection.
In morning trading, GM shares dropped 22 cents, or 13.8 percent, to $1.36, after falling to $1.28 earlier in the day.
The drop same after six-straight days of gains for the Detroit-based automaker, which filed for Chapter 11 on June 1 and was subsequently delisted from the New York Stock Exchange. In the last six days, GM shares have more than doubled to close Wednesday at $1.59.
"While GM does not control the market or its stock price, GM management strongly believes that any recovery for the common stockholders in the chapter 11 bankruptcy process is highly unlikely, even under the most optimistic of scenarios," the company said in a statement late Wednesday.
In a chapter 11 situation, shareholders generally only receive a return on their investment if all claims of the company's creditors are fully paid.
I sold my GM shares last night before the prices could drop below sub-normal profit levels. The bullish sentiments the previous few days had been probably related to positive sentiments about a new and leaner GM with the recent appointment of a new chairman. I had held the counter for a while, through the weeks when it had hit excess of $2, thereafter dwindling to the levels of $1 and subsequently $0.70 before the bullish weeks when it hit $1.60.
Though the sales might be seen as little late, I am glad I decided to recoup some capital before it got any worse. There is a possibility of course, that share prices might sustain and the stocks will continue to do well after a new GM emerges.
However, it is not a risk I'm willing to take as common shareholders after all, only get a share after everyone else receives theirs.
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