If you can't get the stock price to go up, you can always try playing the Jedi mind trick game of stock splits, reverse splits and stock dividends.In a filing with the SEC, General Motors (NYSE: GM) disclosed its plan to effect a 1-for-100 reverse split of its common stock. The plan is part of an agreement with the Treasury Department that would give the United States government a majority stake in GM in exchange for taking on the company's debt obligations.
Normally reverse splits are signs of desperation that aren't worth commenting on, but in this case, it's an even worse sign than usual. At the current price, a 1-for-100 reverse split would peg each GM share at $185 -- nearly double the all-time high of $93.63 the stock hit in April of 2000.
From a liquidity perspective though, a $185 stock is very pricey. At that level, many companies would be opting for forward-splits to reduce their stock prices. The plan for a 1-for-100 reverse split suggests that the Treasury Department and GM are extremely bearish on the future value of the company's shares, and expect that by the time the reverse split is executed, market declines will lead to a market value substantially below $185 per share.
There are billions of other reasons not to buy GM stock, but this is the latest one. A 1-for-100 reverse split of a $1.85 per share stock suggests that investors are in store for more severe price declines.











Reader Comments (Page 1 of 2)
5-06-2009 @ 8:37AM
nickerson said...
This is just the next step to going under. With Obama running the show you can look for more government left wing ideas coming through. Look's like another payoff coming to the UAW from the slugs in the Obama slime machine.
5-06-2009 @ 9:27AM
Jim said...
The USA is one of the very few countries whose Government has not taken an active role in securing the success of their major manufacturing industries. It's about time that WE finally accepted that if we're gonna compete globally then we have to either change the global rules...or play by them.
President Obama is taking a risk that none of the ither previous Presidents had the sense to take. I applaud him, and support him.
And all of you negative, finger-pointing, fault-finding, and blame-placing cynics who are never pleased with how anyone does anything...please either help with tye recovery, or shut up.
"Ask not what your country can do for you...but what you can do for your country" (JFK)
5-06-2009 @ 9:51AM
dhcsmc321 said...
Who is going to purchase an Obamamobile from Government Motors?
5-06-2009 @ 10:36AM
Chari said...
When I read about how a lot of these people bash Union's, I attribute it to the poor education in our school's of what really transpired during the industrial era in the United States. I had a professor back in the nineties tell me that if there was no reason for Union's then there would not have been Union's. I guess these people were not taught about what transpired during the industrial era. There was child labor in this country and these companies even had what they call spanking rooms. I am currently working two jobs because they don't want to hire me full time. Because, then they would have to give me health insurance, even tho I already have health insurance? I have seen unethical treatment of employees at both of these places where I work. Because we cannot afford to hire a lawyer to keep, yes, our bosses honest, they continue to do unethical things to the working person.
5-06-2009 @ 10:44AM
buffalomac said...
So will the new share's effect the old stock options, of course for some?
Got you again ha ha! The golden chute bailout...lived's.
5-06-2009 @ 10:52AM
babyraymond8 said...
I appauld our president for doing whatever it takes to keep american manufacturing alive. I wouldnt drive a foriegn car even if it was givin to me!!
5-06-2009 @ 10:52AM
jrag94 said...
How is it that Obama can run the auto industries when they have asked for around $30 billion, but when it comes to the banks who have wasted away hundreds of billions we just let them keep on having money? Oil going high again to make things worse. No one talking about that. That is what pretty much kickstarted the recession.
5-06-2009 @ 11:01AM
Kit said...
The looney are coming out. Card check means.... when UAW does not agree with Employer in negotiation then FEDS get involved and guess whose butts they are kissing. You moron actually belive this will create jobs?????
More companies will get out of the US completely. THE GOVT has no businesss. Buy AMerican????Your full of it. REAL AMERICANS DO NOT ACCEPT BAILOUT MONEY TO STEAL FORM OTHER TAXPAYERS!!! These car companies that accept bailout will fail no matter what. NO ONE IS BUYING CAR AND MOST OF ALL FROM BEGGARS!!!! UAW ARE CROOKS AND OBAMA IS KISSING THEIR BUTTS!!
5-06-2009 @ 11:10AM
twotll5 said...
making room to go down..
5-06-2009 @ 11:53AM
dane said...
babyraymond8 - how funny, with the exception of Ford, who is not taking any bail-out money and is not yet under the Iron Fist of the Almighty Anti-American Socialist Barrack HUSSEIN OBAMA-BIN-LADEN. As long as he and the Unions are Continuing their rediculous mentality of everyone gets full retirement & full health care the rest of their lives, regardless of how many generations continue to survive. How many dollars do you think you can add to the cost of the vehicle to pay for the cost these until you can't afford it - especially, when you can buy something else without 9 zillion dollars in the aforementioned overhead. Until Obama & the unions are gone, I will never buy "American" again "period".
5-06-2009 @ 11:53AM
DOLLY said...
Yesterday AOL said GM was going to be OK.....Especially with the China portion of GM. I guess it's all 100% b.s. here on AOL. I bet the people writing these stories drive cheap Korean imports, or likely the Prius. Then they sit and tell us what is wrong with GM and Chrysler. AOL could hardly hide its glee when Chrysler went bankrupt.
5-06-2009 @ 12:03PM
Tony said...
Unless the government turns back salaries at GM & Chrysler for management and unions, the companies as we knew them are dead. They will have to live on government subsidies in our new socialist society.
5-06-2009 @ 12:58PM
fopdaddy1 said...
i love these "supply siders" and "free marketeers" who swore the banking industry would regulate itself, denied the recession until we were in it for a year, blast attempts to hold onto american jobs, with hold capitol from the market, forcing the governments hand and then deriding the effort. of course all along they knew the fed would end up giving them free money to create new bubbles to exploit, feeding the public unconcienable self serving "analysis". goldman sachs should be investigated thoroughly, most of its executives imprisoned, and broken up to pay for the trillions they scammed from the entire worlds economy.
5-06-2009 @ 1:04PM
Chrissy said...
Just face the facts. All the other countries are helping out their manufacturers and auto companies..so why can't our country help us out? It is time to support American made products and take our country back. All these other countries are dumping millions into their industries for financial help, health care, retirement, etc...and they need your support..and get your support when you buy imports. When you buy an import you are supporting another country...
5-06-2009 @ 1:12PM
David C. said...
Who is going to purchase an Obamamobile manufactured by Government Motors Corporation?
5-06-2009 @ 1:25PM
Rick said...
I believe it's time for all of you know it-alls to take a wait and see approach. You don't know any more about what's going on than anyone else . If you don't agree with anything and you don't have any valued solutions, then shut the h**l up and quit your complaining. We are all in this together like it or don't like it. You might as well admit it.
5-06-2009 @ 1:23PM
Velvet said...
I support our government's effort to help our auto industry as long as management and the union is paid the same wages and benefits as Post Office employees. It sounds fair to me, and remember at the Post Office employees are required to be able to read.
5-06-2009 @ 2:02PM
Tony said...
Now wait a minute, let's take a look at this. You want regular gov't subsidies like they give in other countries. This means you have no intention of paying back the loans because you will require regular subsidies to keep going. This means that the auto industry will need to be nationalized and made part of the Federal Gov't, just like the Post Office who also receives regular subsidies from the gov't. You will then receive standard gov't salaries. Oh, and the UAW? They will become a federal union like PATCO, the Air Traffic Controllers, who struck the gov't in the 80's in defiance of Reagan's edict and were all fired by Reagan and replaced. Yea, this all sounds fair to me.
5-06-2009 @ 2:11PM
proud american said...
dane, your a nieve little thing. 1st of the workers have worked for and earned their retirements, plane and simple. 2nd Ford took out their loans the spring before all hell broke loose - it's not that they are not getting the loans it's they took them out before the rest. 3rd these are loans not bailout freebees like the banks 4th and most important of all IF YOU CHOOSE TO NOT BUY AMERICAN THEN YOU DESERVE TO FAIL. AS A NATION WE NEED TO STAND TOGEATHER AND TO BLANTATLY BRAG ABOUT TURNING YOUR BACK ON AMERICA YOU DO NOT DESERVE TO BE CONCIDERED A PART OF THIS GREAT NATION......... SO GO GET A BUMPER STICKER AND ANY OTHER SIGNS OF YOUR LOYALTYS FROM JAPAN AND CHINA OE EVEN MEXICO - WE DON'T NEED OR WANT YOUR TYPE IN OUR AMERICA -- TRAITORS NOT NEEDED OR WANTED................................. BYE BYE GO AWAY
5-06-2009 @ 2:19PM
Tony said...
Traitor, nice thing to call fellow Americans. I am surprised you did not add scum and scab to your list of names for Americans. You are a true salesman for "Buy American." You make want to "Buy American" because I would like to have you as a friend. NOT! I will buy what I please and I suggest you do the same. But I still respect you as an American.