Hope you don't own GM - MASSIVE dilution announced

GENERAL MOTORS CORPORATION

300 Renaissance Center, Detroit, Michigan 48265-3000

[—], 2009

To the Stockholders of General Motors Corporation:

General Motors Corporation (“we,” “us,” “our” or “GM”) is undertaking a restructuring as part of a plan to achieve and sustain long-term viability. A key element of this plan involves us pursuing transactions in which we would issue GM common stock in satisfaction of certain of our outstanding debt obligations and retiree healthcare obligations. In connection with the foregoing, we are currently in discussions with the U.S. Department of the Treasury (the “U.S. Treasury”) regarding the terms of a potential restructuring of our debt obligations owed to the U.S. Treasury, pursuant to which the U.S. Treasury would exchange at least 50% of such debt for shares of GM common stock (the “U.S. Treasury Debt Conversion”). We have not reached an agreement with respect to a U.S. Treasury Debt Conversion. The actual terms of any U.S. Treasury Debt Conversion are subject to ongoing discussions between GM and the U.S. Treasury, and there is no assurance that any agreement with respect to a U.S. Treasury Debt Conversion or other aspects of the proposed restructuring described in the accompanying Information Statement will be reached on the terms described in the accompanying Information Statement or at all.

If the U.S. Treasury Debt Conversion is consummated, the U.S. Treasury (or its designee) would own at least 50% of the aggregate amount of pro forma outstanding GM common stock. This notice and the accompanying Information Statement are being furnished to our stockholders with respect to action that may be taken in connection with this restructuring by the U.S. Treasury (or its designee), as holder of a majority of the issued and outstanding shares of GM common stock as of the record date described in the accompanying Information Statement, approving, by written consent (in lieu of a meeting of our stockholders), amendments to our restated certificate of incorporation that would:


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increase the number of authorized shares of GM common stock to 62 billion shares;




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reduce the par value of GM common stock from $1 2/3 per share to $0.01 per share; and


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effect a 1-for-100 reverse stock split of GM common stock, whereby each 100 shares of GM common stock registered in the name of a stockholder at the effective time of the reverse stock split will be converted into one share of GM common stock.

If the restructuring as currently contemplated occurs, there will be very substantial dilution to existing holders of GM common stock. After the restructuring, as currently contemplated (assuming full participation in the exchange offers described in the accompanying Information Statement), existing holders of GM common stock would hold approximately 1% of the outstanding GM common stock.

This is not a notice of a meeting of stockholders and no stockholders’ meeting will be held to consider the matters described above. We are not seeking any consent, authorization or proxy from you, and no action by you is required. The accompanying Information Statement is being provided to you for your information to comply with the requirements of the Securities Exchange Act of 1934, as amended.

The amendments of our restated certificate of incorporation described above will not be effected until the settlement date of the exchange offers and unless we are able to consummate the U.S. Treasury Debt Conversion.





Sincerely,



Robert S. Osborne
Frederick A. Henderson

Secretary
Chief Executive Officer

 

Do you think there is a chance the market will take this as bullish news? I do!

 

At what time was this announced?

The market may use this as an excuse to selloff using an argument such as other companies might adopt the same model.

 

Bullish? A dilution is not bullish.

 

The market has rallied on worse.

 

the only reason this stock is not at zero is because of the lack of borrow. i cannot construct any scenario where common equity is worth anything. it defies logic that this thing is trading with a mkt cap >$1b.

 

He was being sarcastic.

 

Were the hell have you been? Everything and i mean everything is bullish in this mkt. all the findings of the stress test have been leaked out and we know 10 co's will have to issue stock that will dilute yet the mkt laughed and crushed the shorts yesterday with 10-30% runs.

 

it has been leaked that 10 need capital... but when it gets released it will only be 8 or 9 banks this will be very bullish news that 'smart money' will sell into

 

Actually I wasn't being sarcastic. Over the past several weeks the companies who have announced highly dilutive stock offerings have shot higher after the announcement. If you want examples look at some of the big REITs.

Kimco is one off the top of my head. However, there were many many others. A lot of secondaries were announced with earnings.