Dissapointed GM shareholders heading for the exit.

If you have been tracking General Motors Company (GM) at all through recent weeks it seems as if despite all of the bad news shareholders have been holding on in hopes of a turn around. That hope was crushed today with GM shares hitting a new 76 year low. $1.15 a share was the price the company closed at today, equating to a 20% drop in the company's shares today alone. With bankruptcy fears at all time highs, even insiders of the company have resumed heavy selling of their shares in the company in hopes of departing with at least something. I was doing some research when I stumbled upon an article in Yahoo stating that the company is trying to issue 62 billion new shares, 100 times more than the 611 million now offered publicly. Then the question came to mind... What kind of effect will this have on shareholder equity? Well, according to Professor of Economics Gary Moon three words come to mind "dillution of ownership".

Inevitably speaking GM will eventually be bought out (bailed out) by the taxpayers, money will be exchanged for equity in GM and the previous shareholders will be left with pennies on the dollar. An idea that surfaces should be what will happen after the restructuring of the company occurs. According to Moon a reverse stock split will be in order and not until then should an investor be thinking of owning shares of General Motors.