Despite warnings, traders buy GM

DETROIT – Whether it’s a matter of ignorance or greed, people are still buying General Motors stock, even though the company and the government have warned that the shares will someday be worthless.

Investors are picking up millions of shares every day, thinking they’ll profit from what is really a hodgepodge of outdated factories and a pile of debt left behind when the new General Motors Co. exited bankruptcy court protection.

Instead, they could end up losing money very quickly. The price of the shares, currently under $1, has ratcheted up or down as much as 50 cents in one day.

Industry analysts and regulators say two groups are buying Motors Liquidation stock: People who are confused and think they are getting shares of the new GM for cheap, and day traders or institutional investors hoping for short-term gains as others continue buying the stock.

GM and federal regulators say they have done all they can to warn investors, giving old GM the appropriate moniker of Motors Liquidation Co., issuing multiple public warnings and changing the stock symbol from GMGMQ to MTLQQ.PK.

“There are people who think they are buying the new General Motors. Stop. You’re not. You’re buying the detritus,” said Harlan Platt, a finance professor at Northeastern University who follows corporate bankruptcies.

Those who invest, experts say, run a very real risk of losing everything at any moment. Aside from the possibility of the stock vanishing once liquidation of the old company ends, demand could wane and prices could plummet to near zero as more people figure out that they’re not investing in the new GM.

But for now, there still are traders who haven’t gotten the message that Motors Liquidation is merely a shell set up to oversee the sale of GM’s bad assets, get as much money for creditors as possible and then be dissolved.

Since regulators reinstated Motors Liquidation stock sales on July 15 after a three-day suspension, more than 800 million shares have been traded.

Motors Liquidation was born July 10 when the new GM emerged from 40 days in bankruptcy court free of much of its debt and burdensome contracts.

Motors Liquidation has posted a warning on its Web site saying the stock will have no value, but the company cannot halt trading, said spokesman Tim Yost.

“We’re not in any way promoting the trading of it,” Yost said. “We have no legal right to stop the trading. That’s well beyond the purview of any given company.”