Two alarming reports out of Reuters this evening. Apparently GM is issuing $60B in shares and Bank of America needs an additional $34B in capital. The GM news would effectively wipe out current shareholders. If the Bank of America news is true Ken Lewis should be fired tomorrow for repeatedly telling shareholders that they would not need further capital.
S&P futures are taking a hit on the news. You know the old saying: so goes GM so goes….Let’s hope not.
Update – Bloomberg has more on this story here.
Under GM’s latest proposal, the U.S. would control at least 50 percent of 60 billion shares in the restructured GM and a union-run health-care fund would get 39 percent. Unsecured bondholders would get 10 percent and existing shareholders would get 1 percent, GM said. After the exchange was complete, the company would do a 100-for-1 reverse split of the shares.
If 90 percent of the bondholders don’t sign up for the GM offer of 225 shares in the new automaker for each $1,000 in principal they hold by May 26, GM plans to file bankruptcy, Henderson said after unveiling the offer.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
I just saw the futures down 10 and came over here to tell you what a prescient call you may have made on the VIX! Time will tell. Tomorrow may be very interesting. The dam just may break.
And I forgot, one more thing. Ken Lewis is a lying sack of !
These guys just have no shame. It sure would be nice to get some true corporate reform out of this whole crisis. Boards of Directors need to become meaningful again and actually hold CEOs accountable!!!
Will a little more fear enter the market? We’ll see.
the news is bad but so what if the futures tanked…its down less than a percent now, even after this huge run-up…u would expect the markets to correct at least 2-3% immediately. this market goes up mildly on bad news and goes up strongly on good news.
Wow, the futures reversed overnight and they’re up 7 before the market open. I’m stunned. What the hell has gotten into these people?
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