General Motors Stock: Classic Value Trap

When General Motors filed for Chapter 11 bankruptcy in 2009, it was carrying $172 billion in debt and a pension shortfall of nearly $50 billion. It represented one of the four greatest shareholder wipeouts in the history of Western Civilization, trailing only WorldCom, Washington Mutual, and Lehman Brothers in the total amount of invested capital destroyed.

Eventually, a new shareholder structure was made available to the public on November 18, 2010 when the Canadian government, United States Treasury, and the United Auto Worker’s Trust agreed to dilute/and or sell off their stakes by launching a 550 million share partial IPO of General Motors at $33 per share.

Here we are, almost six years later, and General Motors currently trades at $31 per share. The shareholders have collected $3.34 from 2014 onward, making the automaker virtually a breakeven investment. There is a paper gain of 2%, or 0.3% annualized, which amounts … Read the rest of this article!