GM: Please don’t buy our stock!

July 2, 2009

At a time when so many people are beating the drum about the need for companies to file transparent documents with the Securities and Exchange Commission, General Motors (GMGMQ) deserves credit. Granted, the subject of the press release that accompanied yesterday’s 8-K was very grim; but there’s no spin at all in their message:

GM Statement re: GM stock price and volume
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.

GM’s stock, which had been trading over $1 earlier this week before GM made its plea, is now around 80 cents. But judging by some of the comments posted on this Barron’s blog, some investors still aren’t willing to give up.

As was also reported yesterday, GM declined to estimate how many vehicles it will produce in the third quarter. GM’s sales analyst was quoted as saying that since there is an ongoing bankruptcy proceeding, it would be more “prudent” to provide that estimated number after the company sold off its Saturn, Hummer, and Saab brands.

In another publication, CEO Fritz Henderson said that the cost of winding down the company might exceed the original estimate of $950 million. Henderson was quoted as saying that – because of environmental liabilities – the costs might actually reach $1.2 billion.

The one bit of good news for the auto maker was in this article, which reported that GM’s vehicle sales in China rose 38 percent in the first half of 2009. The report credits China’s tax incentives and subsidies for the increase, saying that China is trying to give a boost to its fledgling auto industry and provide a spark to its struggling economy.

Speaking of sparks and struggling economies, the SEC will be closed tomorrow in observance of Independence Day. We wish you a happy and safe 4th of July, and we’ll be back Monday with anything juicy that gets filed late this afternoon.

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