General Motors Corp.'s stock fell to lows not seen since the Great Depression on Tuesday as investors reacted to news that six top executives had sold the remainder of their holdings in the company.
As GM careens toward bankruptcy, the latest vote of no confidence in the most troubled of automakers pushed its shares as low as $1.09 in early trading, the lowest price since 1933. They closed down 29 cents, or 20%, at $1.15.
The market capitalization of GM, until last year the world’s largest automaker, now stands at $702 million. That’s 5.9% that of crosstown rival Ford Motor Co. and 0.6% that of Toyota Motor Corp., which won the global sales crown.
With GM losing $82 billion over the last four full years and $6 billion in the first quarter of 2009, its security as an investment has been in doubt for some time, and the stock has been in free fall since it topped $41 a share in October 2007.
But the sale of nearly 205,000 shares by executives, including retiring Vice Chairman Bob Lutz and North American President Troy Clarke, served to resoundingly underscore just how close to the end things appear. The sales, the disclosure of which is required by securities law, reaped the executives a total of $323,655.
GM has until the end of this month to complete a massive balance-sheet restructuring or face being pushed into a bankruptcy filing by the federal government, which has lent it $15.4 billion to date.
GM has been unable to get holders of $27 billion in bonds, along with the United Auto Workers union, to swap their debt for equity in a deal that, if successful, would leave current stockholders with just 1% of the company.
With that in mind, most Wall Street analysts predict a bankruptcy, and even GM’s chief executive, Fritz Henderson, said Monday that a filing was “more probable” in light of the automaker’s problems.
Still, some speculators have been betting that GM might avoid bankruptcy and that even leaving 1% of the equity for current shareholders would give the stock a value of at least a few dollars a share.
Yet GM’s out-of-court restructuring proposal envisions initially issuing about 60 billion new shares to the government, the UAW and bondholders, then doing a 1-for-100 reverse stock split, so current shareholders would end up with just one share in the new GM for every 100 they own.
Efraim Levy, an analyst at Standard & Poor’s, cut his recommendation on the stock Monday to “strong sell” from “sell,” saying the stock was highly likely to crash. Like many analysts, he now expects GM to file for bankruptcy.
“The shares seem to be levitating like a magic trick,” Levy said.