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.
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Reader Comments (Page 2 of 2)
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.
5-06-2009 @ 2:21PM
toogeorge said...
I wonder how many unemployed car workers know this.........
The amount of taxpayers' money paid to AIG:
$180,000,000,000,
$180,000,000,000,
$180,000,000,000,
Yes, $180 BILLION OF OUR MONEY, to cover lost 'bets' in security derivitives.
I also add that this was reported, in detail, on 60 Minutes on Oct 26, 2008.
(In addition to soaking us taxpayers, AIG is reported to have spent over $400 million in bonuses, I kid you not)
5-06-2009 @ 2:29PM
hsk8ter said...
I do and will continue to buy American cars but not from GM . If what I read is true that the UAW will own 20% to 40% of GM then I say goodbye to them. I refuse to give these overpaid unions a cent of my hard earned cash because I don't think they deserve it . What they call concessions I call smoke and mirrors.I know all of you won't agree with me and especially the workers and the UAW but its my money and would rather give it to a real charity instead of them. Sorry but that how I feel ! I will continue to support and purchase American products but just not from GM.
5-06-2009 @ 2:34PM
Tony said...
I wonder how many unemployed car workers know that they number over 1,000,000 souls since 1978. That's right folks, 3 our every 4 auto worker jobs (UAW) have disappeared in the last 30 years. Oh, and all that money to OUR good friends the banks? The government likes them, apparently they don't like the auto workers. Must be because maybe some people in government drive Toyotas and are tired of being called traitors and scum. When you p-i-s-s into the wind you get something back in your face.
5-06-2009 @ 2:39PM
weneedhelp said...
Tony, our country is in trouble and needs us to stand behind it, when you have a choice and choose to back Japan or other countries well you are showing your colors and well I choose RED WHITE AND BLUE !!!! And true it is your choice to choose who you want to support. I respect you as a person , but if your in a Toyota or Honda I do not respect you as an American. Sorry but like you say it is your choice and well like I say on a bumper sticker recently 'please do not put my American flag on your foriegn car"
5-06-2009 @ 2:44PM
Jim said...
GM and Chrysler received "loans" not "bailouts". You see, you are required to pay back a loan...but are not required to pay back a bailout.
The way many people use these two terms interchangably has me confused. So when the Bank wrote your mortgage...was it a loan or a bailout? When Mastercard issued you a line of credit on your card was it a loan or a bailout? When the the Fed helped you with your school tuition and living expense debt was it a loan or a bailout?
They're loans, which will be paid back if people will stop believing blindly in all the negative propaganda...and instead check out the real facts. The American Automobile Industry screwed up back in the 70's and 80's...but they're not the same now as they were then. and realistically, who\what is?
Buy a Foreign manufacture's car or truck...and you are mostly supporting that manufacture's economy. Buy an American manufacture's car or truck...and you are mostly supporting our economy. The choice is yours. It always has been...it always will be.
Please chose wisely!
5-06-2009 @ 2:44PM
toogeorge said...
I don't seem to be able to get posted on "Wallet Pop". I see only one commentator recently .......What's going on? Censorship?
5-06-2009 @ 2:51PM
Tony said...
Dear Confused: Yes, you pay back loans. Subsidies (which some union people favor) are given to businesses without any intention of being paid back. If you favor subsidies for the auto industry, as they do in other countries of the world, then the auto industry has no intention of paying them back, ala the Post Office. Capece?
5-06-2009 @ 3:04PM
Tony said...
Subsidies & Socialism 101: Some in the auto industry want continued government support, but they also want to continue their present wages and benefits. When true socialism arrives, then it will be the union wages that are the rich of the US and you will be drug down to the level of minimum wage like the rest of the Americans (fliipin' burgers and taking shifts at Taco Bell). Be careful what you wish for people because this president is willing to deliver, at a price of your economic freedom.
5-06-2009 @ 3:34PM
Proud american said...
Tony, you keep taling your true colors show through, and I don't see a whole lot of red white and blue. Go get in your Toyota and scratch your silly little head in wonder about why our country is falling apart.......... but out of respect for your loyalties DO NOT PUT MY AMERICAN FLAG ON YOUR YOUR TRAITOR CAR................ YOUR EITHER FOR AMERICA OR AGAINST IT , GET YOUR CAR LOOK AT WHICH COUNTRY IT REPRESENTS AND YOU WILL KNOW WHERE YOUR LOYALTIES BELONG...... OH AND BY THE WAY WOULD YOU TRUST THEM TO BUILD AMERICAN TANKS SHOULD WE GO TO WAR WITH THEM??? WELL IF YOU HELP KILLOFF AMERICAN CAR MAKERS THAT IS JUST WHO'LL BE WAKING THEM......... SILLY SILLY BOY - DO YOU THINK JAPAN WILLTAKE CARE OF YOU ONCE YOU HELP HAND THIS COUNTRY OVER TO THEM ONE CAR AT A TIME ????? ( OR WHAT EVER OTHER COUNTRY YOU CHOOSE TO BACK) WHEN WE ARE ABLE TO CHOOSE REAL AMERICANS WILL CHOOSE AMERICAN......
5-06-2009 @ 3:38PM
toogeorge said...
No comment!
5-06-2009 @ 3:44PM
toogeorge said...
Jim.......You seem to be one of the few in this country who looks beyond our shores.... I would look at it another way also....... We can spend much more on a insurance company, with losses in gambling and bad mortgage loan decisions than we are prepared to spend to keep a manufacturing icon of this country afloat....... As you point out most other countries have no such qualms
5-06-2009 @ 11:19PM
SIMPLE CHOICE said...
GO out and look at the car you drive, if it is not an American car you have CHOOSEN to support another country above America..... in a time like this when America is fighting to get back on her feet to intentinally buy a car other than America is showing where your loyalties stand. So what is it ???? them or us??? Your choice yes, but DO NOT PUT THE FLAG OF AMERICANS ON YOUR TRAITOR CARS....... FOR THAT MUCH IF YOU DRIVE A TOYOTA GO PUT UP THE FLAG OF JAPAN ---YOU DO NOT DESERVE AN AMERICAN ONE ! ! ! ! ! ! ! ! YOUR CHOICE AMERICAN OR NOT YOUR CAR SHOWS WHICH COLORS YOU FOLLOW
5-06-2009 @ 3:51PM
Tony said...
My choice is my own decision. I served in the service and fought for our flag. I am an American, so are you. I will buy what I please, after I earned the money in this great country. It is not the American way to reward inefficiency, stupidity and greed (unless you are in the financial sector). The auto industry got themselves into this mess they can get themselves out of it. By the way, I drive American.