GM: This Stock Is Worthless

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:

• The Death of General Motors
• When Companies Go Bankrupt
• CNBC: GM Can't Avoid Bankruptcy
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