GM details plans to wipe out current shareholders [securities fraud]

The Globe and Mail / Reuters ^ | May 5, 2009 | Kevin Krolicki

[MplsSteve]

Having worked in the securities industry for sometime now, the type of plan the article describes is not out of the ordinary.

I’ve seen a number of companies (over the years) file a Chapter 11 Plan of Reorg in which the existing common stock becomes worthless and the oustanding bonds are swapped for newly issued stock.

In these Chapter 11 Plans, existing stock holders are determined (in advance) to rejected the Plan and their votes are not sought. But bondholders are allowed to vote on the Plan as to whether they want to swap their bonds for newly issued stock.

The sham here is that not even bondholders will get the chance to indicate their approval or disapproval of the Plan. Essentially, it’s a cram-down.

[HiTech RedNeck]

How does this work, or is this just for current GM employees

[HiTech RedNeck]

If you bought it at a penny and it rose to two cents, you could double your money.

[HiTech RedNeck]

How can there be any integrity in a “government owned” company. The minute some issue comes up where the government and company would normally be at odds (some alleged civil offense or crime) what will we see? The same government as both prosecution and defense? It is to laugh, then to cry.

[April Lexington]

Absolutely, this is government run amok. If the intent was to have government buy the new shares and then divest as quickly as possible, then, maybe this would be better than watching GM die. But, here, the UAW has a controlling stake and these monkeys will never give up control of an operating company until the last bankruptcy. The problem is the government and the UAW in concert trying to run a for profit organization. Recipe for insanity. DO NOT buy shares in this new company for the long run...