Don't Buy This General Motors Stock
The leftover bankruptcy assets are trading but this is not the new car company.
Aug 18, 2009 — -- I normally don't use this column to dispense stock tips.
But today I make an exception because I have some can't-miss advice. Trust me; you won't be sorry on this one. Are you ready?
Here it is: Stay away from MTLQQ.
MTLQQ is the new trading symbol for shares of the old General Motors Corp. that now languishes in bankruptcy. The old General Motors now goes by the name of Motors Liquidation Co. and contains the unwanted assets and unsecured claims of the old GM spun off as part of the bankruptcy process.
The Q at the end of the company's ticker symbol signifies the company is in bankruptcy. And as a general rule of investing, a Q should be avoided.
After the old General Motors filed for bankruptcy in June, the company's shares -- which had traded under the symbol GM -- stopped trading on the New York Stock Exchange and switched to the Over-the-Counter Bulletin Board.
The old GM as represented by Motors Liquidation is entirely separate from the new General Motors Company, a privately held company at this point owned mainly by the U.S. government. It has no shares yet available for public purchase.
GM After Bankruptcy
For more than a month, Motors Liquidation and financial regulators have been warning investors to stay away from MTLQQ shares, yet many continue to buy.
"Management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios," the Motors Liquidation Web site warns.
In bankruptcy proceedings, owners of common stock are last in line when it comes to receiving anything for their investments. Secured creditors are first, unsecured creditors -- including most bondholders -- are second, followed by the owners of any preferred shares.
Worried about the high level of trading in the old GM shares, the Securities and Exchange Commission and the Financial Industry Regulatory Authority last month issued a statement warning that buying shares in a bankrupt company is a high-risk venture.
"While the common stock of Motors Liquidation has not been cancelled, investors should not interpret that as indicating the shares have any value," the SEC and FINRA statement said.
FINRA even halted trading in the old GM shares for a couple days in July and changed the ticker symbol from GMGMQ to MTLQQ to eliminate confusion between the old and new GM and discourage trading in the Motors Liquidation shares.
Trading Continues
Yet the trading has continued with an average daily volume of nearly 33 million since the SEC and FINRA issued their warning, with the share price more than doubling between Aug. 4 and Aug. 11.
The MLTQQ shares hit a recent high of $1.10 on Aug. 11, the day the new General Motors announced the new Chevy Volt will get up to 230 miles per gallon. Good news, indeed, but remember, there's no connection between Motors Liquidation and the high-efficiency Volt that will be manufactured by the new GM.
FINRA and the SEC attributed the heavy interest in MLTQQ shares to rumors peddled in fax or e-mail newsletters, Internet message boards and Web sites offering online stock tips.
"Unfortunately, investors may have received confusing, potentially misleading, information about the old GM," FINRA and the SEC warned.
Think possible stock manipulation.
And that's why I say this is a can't-miss tip: Steer clear of MTLQQ.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
David McPherson is founder and principal of Four Ponds Financial Planning in Falmouth, Mass. He previously worked as a financial writer and editor for The Providence Journal in Rhode Island. He is a member of the Garrett Planning Network, whose members provide financial advice to clients on an hourly, as-needed basis. Contact McPherson at david@fourpondsfinancial.com.