Tale of the Big 3 continues....

[Broken Arrow]

Normally, I don't post about market fluctuation, because... well, that's the market for ya.

But are you guys seeing this? The whole market took a dive this morning, in large part because GM's deal with bondholders fell through, and bankruptcy was imminent.

Now, all of a sudden, the tide has turned in light of approval from a revised deal.

Is anyone else kind of awed by this sort of market fluctuation, or am I just easily amused?

I personally don't think GM is "too big to fail" (at least not for a soft, gradual fail) but evidently, many in the government would disagree.

[disneysteve]

I haven't been paying attention today but it is entertaining to watch.

As for GM, I don't think any company is too big to fail. I believe in the free market. If GM shuts down, some other company would swoop in and do what they did, probably better than they did it. I think what was really needed was for the government to let some of these struggling companies fail and see what grows in their place.

[simpletron]

I haven't read though the new deal, but the old deal was crap for bond holders and shareholders. the deal was $1000 bond for 225 shares of GM, which would be 100:1 reverse splitted or $1000 bond for 2.25 shares of new GM. if you assumed that GM was going to have constant market capitalization the shares after the reverse split would worth the same as the current shares because they were going to increase the shares outstanding by 100 fold first. (note: the assumption about constant market capitalization is false because when GM drop the debt, the company would be worth more). so the old deal was trade $1000 in bonds for under $10 of stock, who thought GM/government was going to convince 90% of bond holders that that is a good deal? also remember if you had the bonds and didn't take the deal and GM pulled though because everyone else did the trade, you would have gotten interest + principal back.

I personally don't think GM is "too big to fail" (at least not for a soft, gradual fail) but evidently, many in the government would disagree.

I think the government realize that GM in it current form is unsustainable, but want to minimize how much of a slim down GM has to do, and thus keep as many jobs as possible. also the government wants to pander some money into the UAW pockets for reelection votes.

[KTP]

Why does UAW get anything at all? They were going to take 39%, then reduced to 20%, while the bondholders, who had more in GM than even the government, were going to get 10%? Of all of these, the poor shareholder was going to be left with 1%.

After all this, how does the stock even justify trading at $1.31???

Who would be crazy enough to buy a bond in the new GM? Fool me once, shame on you, fool me twice...

This whole market is just crazy right now.

[GREENBACK]

I wish the hell they had gone into bancruptcy before they got all that money to keep them from "failing". This truly turns my stomach.

[KTP]

It is pretty crazy. In our jobs when we get fired or laid off we get an escort out of the building, but if you happen to be a UAW and your company is bankrupt and taking $$$ of taxpayer money you get $40,000 to over $100,000. I guess it happens in a lot of other businesses, but it still boggles the mind.