Over-The-Counter Market Now Sells GM Shares

Since General Motors went into bankruptcy proceedings, the company has been delisted from the New York Stock Exchange. To buy GM shares now, you have to go through a smaller and much less prestigious over-the-counter market.

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As if filing for bankruptcy wasn't enough, as if dropping out of the Dow Jones 30 Industrials wasn't enough, now General Motors faces this: the company has been delisted from the New York Stock Exchange. To buy GM shares right now, you have to go through a smaller and much less prestigious place known as the over-the-counter market. NPR's Jim Zarroli went to the counter.

JIM ZARROLI: There was a time when GM was what they call a widows and orphans stock. It was so reliable an investment that even the most vulnerable among us could feel safe putting their money into it.

To see how far GM has sunk, you have to come to this small, undistinguished building in downtown Manhattan to the Pink OTC market. This is where troubled companies come to be traded. The Pink OTC market can't turn anyone away. In fact, it's not really a stock exchange at all - it's what's called a listing service. The only thing about it that suggests stock trading is the neon wallboard listing current share prices.

Cromwell Coulson is the market's CEO.

Mr. CROMWELL COULSON (CEO, Pink OTC Market): We have at the top of the wallboard, we have companies that have met the listing process for OTC QX, which is our quality control platform. And...

ZARROLI: So those are the companies that sort of meet certain criteria that you've set.

Mr. COULSON: Yes. Those are the investable, worthy of investors' consideration.

ZARROLI: And then down below here, it's says all OTC.

Mr. COULSON: We have the all OTC market, which is the jumble of the OTC market.

ZARROLI: That's everybody else.

Mr. COULSON: That's everybody else. And there is high variability and quality in the OTC market.

ZARROLI: And so GM shares are listed down here on the all OTC board. So…

Mr. COULSON: Yes.

ZARROLI: …so what does that say?

Mr. COULSON: That says that investors should be very careful.

ZARROLI: When I interviewed Coulson, GM shares were selling for 69 cents. I asked why would anyone buy shares in a bankrupt company?

Mr. COULSON: They're speculating. They're hoping that some other investor comes in to pay more.

ZARROLI: So they're thinking even though this is a company in bankruptcy, something unexpected might happen and these shares might be worth something?

Mr. COULSON: Yes, and the shares may go up before they go to zero. And there is a very small, infinitesimally tiny chance the bankruptcy plan could change and shareholders could get something. The chances of that happening are, from all public press reports, very low.

ZARROLI: Yesterday, GM's shares hit $1.34. The company put out a press release essentially warning investors not to waste their money. Once the court approves GM's bankruptcy plan, it will become a private company. The old shares will become a kind of wallpaper. What happens after that depends on the government.

When GM declared bankruptcy, the government agreed to give it $30 billion. President Obama said it could have simply lent GM the money.

President BARACK OBAMA: But for years, GM has been buried under an unsustainable mountain of debt, and piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past.

ZARROLI: Instead, the government acquired a 60 percent stake in GM. U.S. officials say sometime early next year, GM will probably go public again. When that happens, the government can sell off shares and recoup some of the taxpayers' money. The administration insists it will do this as soon as it can.

But John Paul McDuffie of the Wharton School says it won't be easy. He says the new GM shares won't be worth much at first.

Professor JOHN PAUL MCDUFFIE (Wharton School): The government essentially bears more of the risk, because if GM doesn't thrive, those shares won't be worth anything near the amount of money that's put in. And in fact the odds of the government ever getting fully repaid on this investment are extremely low.

ZARROLI: But one administration official speaking on background said there's a good possibility the government can recover a good chunk of its investment by selling the shares it's acquired. For that to happen, GM has to start selling a lot more cars.

Jim Zarroli, NPR News, New York.

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