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Last week I wrote about the plans for a General Motors IPO in 2010, which led to some confusion: General Motors has been publicly traded for nearly a century, so what's all this about an IPO?

One commenter asked "Does anyone know if you own GM stock now, and they have a new IPO what happens to your existing shares of the stock?"

The answer is a sad one, but here it is: The shares of the old GM will be "canceled" as part of the bankruptcy and only the shares of the new GM that can be purchased during and after the IPO will have any value. Shares of General Motors are still trading on the over the counter market for around 65 cents per share -- perhaps as a result of the confusion surrounding the bankruptcy. But it's extremely unlikely that those shareholders will get anything as part of the bankruptcy.

The reason is that shareholders always come last after creditors in a bankruptcy situation, and there isn't enough value in GM to make all the parties that are owed money whole. Because of that, there is nothing for shareholders.

What will happen to old General Motors shares when the new company goes public? originally appeared on BloggingStocks on Tue, 07 Jul 2009 14:20:00 EST. Please see our terms for use of feeds.

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