One thing that's been bothering me lately is the fact that shares of the old General Motors continue to trade with tremendous volatility -- interesting given that the shares are guaranteed to be worthless.New York Post columnist John Crudele is bothered by it too. He took the time to ask an SEC spokesperson why the commission doesn't just go ahead and halt trading in MTLQQ -- the ticker symbol under which GM now trades as Motors Liquidation Company. The response was classic bureaucratic barf: "The federal securities laws are designed to ensure that there is complete and accurate information about registered securities, not make judgments about the merits of any particular investment. Holders of GM stock are entitled to sell their shares and others are entitled to buy them."
That line of reasoning is so wrong in this case that it's not even funny. The SEC has to balance the need for regulation with the interests of promoting a free market: Since GM shares are worthless, the only reason that anyone would want to buy them is that they are misinformed, ignorant, or just plain stupid. People profiting from selling GM shares are trading worthless stock to people who don't understand how it works.
Adding to the confusion is the fact that there is tremendous media coverage of the turnaround at General Motors, and the company's executives are waxing like a drunken uncle at Thanksgiving about the new company's prospects. A naive investor might look up the company and find shares of General Motors trading for less than a dollar and figure what the heck?
The issue here is that there is no benefit to allowing GM shares to be traded freely and a tremendous potential for the exploitation of naive investors by boiler room-type charlatans.
Major props to Mr. Crudele for pointing this travesty out and a memo to the SEC: Halt trading in GM before more people lose money for no reason.
Before the bell: Stocks futures steady ahead of GDP, housing data
Google's plan for netbook PCs moves higher into the clouds
So long peak oil, here comes peak uranium
Reader Comments (Page 1 of 1)
7-16-2009 @ 11:09AM
Lee Gibson said...
According to the MTLQQ page on my broker's Web site, 41.71% of these shares are held by institutions. Assuming this figure is more or less accurate, one wonders just which institutions these are.
7-16-2009 @ 11:16AM
Dan Barnett said...
Are the MTLQQ shares totally worthless or will there be something in the "new" GM for them? Unless & until they are declared worthless officially, the purchase on the hopes of getting something of the new company is at least a possibility. Not smart in my opinion, but a possibility.
7-16-2009 @ 11:47AM
kpinvest said...
I'm going to start selling shares in my company: KP Air Supplies, LLC. If you buy shares, it gives you the right to inhale and exhale. I cannot back up my securities; since I cannot 100% guarantee air will be available while you are part owner of my company.
Or you can just give me your money. Either way.
Investing in nothing, knowing it will be worth even less than nothing, is just plain silly, imo. I don't understand it.