The market is coming to the conclusion that even with the auto bailout, the value left over for today’s equity holders will be something approaching zilch. After spiking on last week’s deal to prevent a Christmastime bankruptcy, the automaker stocks have been getting hammered.
GM is off 16% today and 30% since its close last week. Ditto for Ford, also down about 16%.
A Credit Suisse analyst argued the worhlessness of GM shares yesterday, in a note titled Game Over For Existing Equity,
“If GM and its stakeholders can navigate through a tricky set of negotiations, and all parties can agree to sacrifice value in a manner consistent with the targets laid out by the government, we still arrive at a discounted cash flow-derived equity value of less than one dollar per share.”