Worthless GM stock will keep trading, but not on NYSE
Traders are still having fun with General Motors Corp. shares today: The stock plunged as low as 27 cents this morning after the company's bankruptcy filing, then quickly resurged to as high as $1.01.
A savvy trader who bought at the morning low and sold at $1.01 made 274%. Not bad for less than a day’s work.
The shares were trading around 84 cents at about 10:50 a.m. PDT -- still up 9 cents from Friday’s close.
GM has said unequivocally that the stock will be worthless after the government, the United Auto Workers and the company’s bondholders take their pieces of the restructured company. But we’ve seen this movie before: Traders often will play with a worthless stock for as long as they’re able.
They won’t be able to on the New York Stock Exchange after today, though. The NYSE announced it will delist the stock after today’s session.
Why should a worthless stock trade anywhere? For one thing, there still are investors who’ll need to sell -- including funds that replicate the Standard & Poor’s 500 index.
Although Dow Jones & Co. said today it will drop GM from the Dow industrial average, the stock remains a member of the S&P 500. Assuming S&P jettisons GM soon, S&P 500 index funds will have to do the same.
(And GM still gets five more days to hang around in the Dow: It will be replaced by Cisco Systems on June 8.)
There also are investors who still need to buy GM: short sellers who previously sold borrowed shares, betting on a collapse. They now must cover those trades.
-- Tom Petruno
Photo: The GM logo on a chimney at the shuttered assembly plant in Janesville, Wis. Credit: Scott Olson / Getty Images