GM has a negative equity of $60 billion. I've never seen a listed company with negative equity before but it basically means that company, if bought is worth less than $0, yet some how the market capitalization for GM is $1.13 billion at it's current share price of $1.85.
So if someone bought out GM for $1.13 billion, you'd get $60 billion in debt. Sounds like a terrible deal to me. So here's my question, what do you do with a company that is so terribly in debt? You shut it down. Sad, but true.
I highly doubt that GM will ever make it back to profitability, or even have positive equity in this lifetime. Given the current economic climate we have now, I highly doubt that car sales will return in time to even give GM a chance.
So here's my play. I've decided to buy a few put options with a strike at $3 for $2. If GM goes broke, share price goes to zero, the contracts become exercisable and the underwriter is forced to buy @ $3.
We'll see what happens.
1 comment:
You made an expensive bet.
Your bet would have been cheaper by shorting the stock, and then just buying call options at $3 to provide a floor on the maximum risk taken. June 3's right now are trading at 20 cents bid, 23 cents ask.
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