"We're looking at a fair price of just 12 cents," said analyst Joe Phillippi.
With a half-dozen of its own senior executives selling off stock, the once titanic shares of General Motors Corp. seem increasingly likely to plunge into the penny stock category, industry analysts warn, far below the already abysmal low GM hit on Tuesday.
Shares tumbled to just $1.15, a slight rebound from the day’s low point of $1.09, which would have marked GM’s lowest stock price since April 28, 1933 during the great depression. But most analysts believe that the company will soon tumble below the $1.00 mark, as it approaches an increasingly likely bankruptcy.
“We’re looking at a fair price of just 12 cents,” analyst Joe Phillippi, of AutoTrends Consulting, tells TheDetroitBureau.com. That would be before a planned 100-to-1 reverse split that GM officials have announced after the company completes its reorganization.
Just last autumn, former CEO Rick Wagoner was trying to prop up the automaker’s shares when they had fallen below the $8 level. The company’s 52-week high was $21.37; and as recently as 2007, it was trading above $40.
But there’s little reason to believe that the downward trend will reverse itself soon, especially not with new CEO Fritz Henderson acknowledging, on Monday, that a bankruptcy falling is increasingly likely, if not absolutely inevitable. Such a move into court-ordered protection would leave current shareholders with as little as 1% of the company that likely emerged from Chapter 11, according to Phillippi and other industry analysts.
At some point, whether the automaker declares bankruptcy or not, GM shares could be considered a penny stock, which the automaker itself warned “could have an adverse effect,” because some brokers might decline to handle trades.
Even if the automaker avoids that ignominious fate, it is traveling perilously close to the point at which the New York Stock Exchange would normally consider delisting a company. The NYSE has suspended such actions until June 30, a sound move, observers note, considering the number of once-strong stocks that have tumbled sharply during the current economic crisis.
Nonetheless, there is a growing move to flee the sinking Titanic, and even the captains of the GM ship seem unwilling to stay onboard, listening to “Nearer My God to Thee.” On Tuesday, the company revealed six top executives sold off a total of 200,000 shares in the normal window that allows such things after earnings are reported. One thing is clear; they won’t be exercising many of their stock options at the current price.
Remarks yesterday by President Obama’s Press Secretary, Robert Gibbs, on GM Executive stock transactions:
Q: Question on General Motors. As it approaches its deadline for restructuring, you’ve got already low public confidence in the company, and now you — suddenly GM executives are dumping stock, which has helped to send shares to a 76-year low. I’m just wondering, what does the administration think of this kind of action that further undercuts public confidence and at a time when the government is propping it up and considering further bailout measures?
MR. GIBBS: Well, you know that, as you mentioned, the deadline is approaching for a restructuring deal that the President and the Auto Task Force believe puts General Motors on a sustainable and viable path without continued government involvement. That was the goal in the original iteration of this, as the original plan was looked at, as the Auto Task Force the President rejected as insufficient — that plan — and now back to the drawing board.
But again, I think in many ways — I’ve talked about this over the course of the past several months — that is it’s not just General Motors, it’s a lot of auto companies, foreign and domestic, that are seeing their sales slump significantly because of a downturn in the economy, which — those sales figures not unexpected, given where we are.
So I think – twofold — the task force will continue to work with GM to get a plan that they believes put it on a sustainable path while, at the same time, the President works to improve the economy, because the bottom line of this for the long term is going to be getting the company in a position to take advantage of an improved economy to sell cars to the American people and to sell cars abroad that those people want to buy. And that’s the focus of the task force and my guess is the focus of all the executives at General Motors, as well.
Q: Is it an intelligent move for the executives at GM to start selling off their own personal holdings in a sensitive time like this?
MR. GIBBS: I think it’s probably better that I resist the temptation to comment on individuals’ personal stockholdings, except to say that the President and the Auto Task Force, again, want to ensure the continuation of General Motors and to do so in a way that puts it on that path that doesn’t require continued government subsidies and government involvement. And that’s the pathway for GM’s future…
Q: Does he really have no opinion on whether it’s a good idea, with the GM situation, that executives would be selling stock, that that would not send a signal —
MR. GIBBS: Well, look — no, no, I —
Q: — to consumers and folks who are looking at the situation while the task force is trying to come up with a plan?
MR. GIBBS: What I’m hesitating to do is get involved in people’s personal financial decisions.
Q: But wouldn’t that send a signal out there that some people would — might feel justifiably alarmed about?
MR. GIBBS: Well, I think there’s enough with a company that is — that has to come up in a few weeks with a deadline — facing a deadline to restructure, that there’s plenty in GM to worry about.
Q: But you said that’s to keep it alive. And if the top executives are selling stock, that signals that they think it’s going to die.
Q: Spending our money.
MR. GIBBS: Well, I will take a closer look at the report. I have not seen it.