posted on Mar, 23 2005 @ 04:48 PM
At the above link, you can see a chart describing GM's stock price and its plummet since this time last year (45 per shr to 28 per shr). Notice the
massive drop in the last 30 days. I am curious to know what others think of this? What would a default on its bonds by GM mean for the American
you'll find an analysis by a guy who is predicting bankruptcy for GM. He says the
GM has $300 billion in debt finance.yahoo.com...
...and has a market cap, now, of $16 billion. See the problem there? The bondholders could buy the company nearly 20 times over if they used their
money to buy stock instead of loan it to the company. The implication is clear--that GM is headed towards bankruptcy, and will default on the
bondholders, who will then own a company worth less than $16 billion dollars!
For every one point that interest rates rise, refinancing GM's debt will cost an additional $3 billion in annual interest payments -- money that they
clearly do not have! Where is GM going to get another $3 to $6 to $9 billion as interest rates rise by 1%, 2%, and 3% more? Selling cars? Nope.
Selling stock? Unlikely in this market! Borrowing more? From who? The U.S. government itself is propping up this bond market, and there are no buyers
even for U.S. bonds, and there haven't been for months now!
So, therefore, GM will soon be a $300 billion dollar blow-up!
Is this analysis correct or is it paranoia? I am also wondering if this selloff of GM is related to an increasing awareness of Peak Oil. I'm no
expert, but I'd be curious to read other's opinions on this issue.