A recent AP story highlights the fact that shares of the old GM (before the government takeover) are not only still traded, but spiked to 13.9 million shares about 2 weeks ago. What’s that deal? Why would investors be buying shares in an ostensibly worthless company?

The short answer is, Who cares?

Whether you believe that shares of stock have value because they represent ownership in a valuable underlying business, or because the underlying business may be of some value in the future, the fact remains that shares of stock only have value because of one simple reason: other investors believe it does.

At the end of the day, that’s really the only thing at play, right?

So, it’s not entirely surprising that shares of MOTORS LIQUIDATION (MTLQQ.PK) (the old GM) are still being traded – there are still speculators out there hoping to make a quick profit before the company is terminated by the feds (once all of the General Motors debt has been dispersed).

It’s almost comical to look at the key statistics of the Motors Liquidation Company:

• NO P/E ratio
• NO Dividend yield
• -$56.845 Earning per share

and yet it still trades under a dollar with swings of up to $0.50 a day!

The article claims that many of the people buying this stock are ignorant investors thinking they’re getting shares of the new government owned GM:

“Industry analysts and regulators say two groups are buying Motors Liquidation stock: People who are confused and think they are getting shares of the new GM for cheap, and day traders or institutional investors hoping for short-term gains as others continue buying the stock.”

I don’t know. Personally, I think if people are dumb enough to think the “new GM” is earning -$56.845 per share, has essentially no information regarding sales, revenue, debt etc. then they shouldn’t be playing in the stock market anyway. I think most of the traders know exactly what they’re trading – a highly volatile penny stock, and they’re hoping to make a quick buck passing the hot potato before the jig is up.

Besides:

“GM and federal regulators say they have done all they can to warn investors, giving old GM the appropriate moniker of Motors Liquidation Co., issuing multiple public warnings and changing the stock symbol from GMGMQ to MTLQQ.PK.”

What more do we need to do to protect people here?

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