Old GM Bondholders Getting Shares In New General Motors May Depress Price
Investors holding bonds in the old General Motors Corp. will receive stock and warrants for shares in the new General Motors Co. On April 21, an action that analysts said may depress the stock price.
Old GM, now known as Motors Liquidation Co, will give bondholders 150 million shares in GM and warrants to buy 272.8 million more shares. A trust holding the shares will distribute them directly to bondholders’ brokerage accounts on or after April 21, according to a memo distributed Wilmington Trust Inc., a money-management firm hired by the creditors’ committee, reported Bloomberg.
Some of the bondholders are retail investors who may sell the shares and briefly sink GM’s stock price, said David Whiston, an analyst with Chicago-based Morningstar Inc. Investors have probably priced in the dilution, so it won’t change GM’s long-term value, he said. He has not changed his $48 a share valuation based on the release of shares to bondholders.
“I would think that there will be more selling than holding,” Whiston said. “Any sell-off in GM is a buying opportunity. Long term, I think the company is positioned very well.”
Bondholders were promised stock and warrants in the new GM to make up for some of their loss during the predecessor company’s government-backed bankruptcy. The warrants given to bondholders for new GM stock are already in the money, according to a report by Kirk Ludtke, senior vice president of CRT Capital Group, a money management firm in Stamford, Connecticut.
When U.S. Bankruptcy Court releases the warrants and stock through a trust, bondholders will collectively get 136.4 million warrants for one share each at $10 a share and an equal amount at $18.33 a share, said Wilmington Trust, which is based in Wilmington, Delaware.
Owners of old GM bonds must notify Wilmington Trust by April 15 to get stock and warrants on April 21. If they notify Wilmington later, the bondholders will get their shares and warrants at a later date.
Currently, Motors Liquidation has about $30 billion in claims allowed by bankruptcy court, of which about $29 billion are from the bondholders, said a person familiar with the matter.
There may be as much as $8.8 billion in additional claims that could be allowed by the court, Ludtke said in the report.
If the approved unsecured claims exceed $35 billion, GM would have to issue up to 30 million shares, Jim Cain, a company spokesman, said in an interview. GM doesn’t expect claims to reach that amount, the company said in a regulatory filing.
The bonds issued by General Motors Corp. should recover about 30 cents on the dollar when the shares are distributed later this month, Ludtke said in a telephone interview. He expects GM’s share price to rise to $40, which implies a recovery rate of about 40 cents on the dollar, Ludtke said.
GM shares were unchanged at $32.87 yesterday in New York Stock Exchange Composite trading, down from a high of $38.98 on Jan. 7. The shares were priced at $33 for the initial public offering in November.
More Industry

RV Group Expands Carolina Footprint
Blue Compass RV Columbia Northeast is the 13th RV dealership owned by Blue Compass in the Carolinas.
Read More →
Agent Acumen
An Agent Summit panel of people who’ve been supporting auto dealers for years gave both timely and timeless advice for those starting out or mulling the prospect.
Read More →
Missed Maintenance Creates Opportunity
As families get back on the road and into daily school routines, service drives have an opportunity to capture customers who are behind on recommended vehicle maintenance.
Read More →
Mitsubishi Unveils U.S. Plan
The automaker announced a strategy that includes an expanded lineup and dealership presence, along with more ‘rugged’ and electric models.
Read More →
Selling to Grow
The question of whether you should sell your agency and if so, when, is up to you. But it’s a question worth asking to ensure you keep the business on the right path for yourself, employees and clients.
Read More →
Recalled Vehicles Hit 5-Year High
Though the number of events has fallen so far this year, impacted units are up significantly. Meanwhile, regulators consider consumer notification changes.
Read More →
Auto Group Acquires Top-Performing Rooftop
Car Pros sold its Kia Huntington Beach location to Sutherlin Automotive Group, marking the buyer’s third location in Southern California.
Read More →
China as Pacesetter
Automotive leaders huddled on where North America stands in the global picture and how it can strengthen its position against the Asian juggernaut’s surging industry.
Read More →
BMW Concept Car Makes Fuel to Burn
The prototype developed in concert with a South Carolina university engineering team generates more solar energy than it uses in a typical daily commute.
Read More →
South Carolina Auto Group Downsizes
Florida-based group Holler-Classic has acquired four rooftops, its first in South Carolina, from Dick Smith Automotive Group.
Read More →