Rod Lache: GM Will Be Worthless in 12 Months
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Deutsche Bank analyst Rod Lache added to General Motor's misery on Monday morning by proclaiming that the common shares in the company are worthless. He reduced his rating to a sell and declared that the company will be trading at $0 (that's right, zero) in just twelve months. Barclays Capital and Buckingham Research also cut their price targets for the company, deciding on a more-generous price target of $1.
GM tumbled after the downgrades, sending the shares in the company to a near 60-year low of $3.23 a share. The entire company now has a market cap of just $1.85 billion dollars.
At the beginning of 1999, General Motor was trading from almost $90 per share. Since then the automaker has crashed, losing approximately 95% of its value. During the summer of 2007, General Motors was trading at a still-respectable $35 per share. The General Motors train has now jumped the tracks, and it seems to be only a matter of time before the company is nothing more than smouldering wreckage.
Industry observers are saying that the company likely doesn't have enough cash to last the year - meaning, not enough cash to last another month and a half. The company has been actively petitioning the US government for a bailout so that it can continue to fund its operations.
GM (and other automakers) have been savaged by the vicious downtown in the global economy. Customers are unable to obtain credit to purchase vehicles, and those who do have the credit are simply delaying purchases until the economy starts to improve. This has created a "perfect storm" of bad news for companies such as GM, and they are unlikely to ever recover.
Analysts are pessimistic, the common shares are wilting by the day and the company's bonds are indicating an extreme amount of stress (obviously). Even if the company is able to secure a bailout from the government, the terms for common shareholders are likely to be very unfavorable (meaning, common shares will very likely be completely wiped out, just like in most bankruptcies). As Deutsche Bank analyst Rod Lache said, even if General Motors doesn't go bankrupt, any other scenario would be very "bankruptcy-like".
Basically - common shareholders in General Motors need to head for the hills, and fast.
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Filed under:
The Economic Meltdown |
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