New GM IPO... robbing the public all over again?

Discussion in 'Economics' started by Sanaz3, May 17, 2010.

  1. Sanaz3


    I have quite limited knowledge of how going public works. But I have always wondered what happens to common shareholders when a company (like GM) goes bankrupt? I remember GM's last days, when it was being traded for 2-3 cents/share. So what happened to those who owned those shares and kept them? Do the shares automatically expire when a company files for bankruptcy or not?

    My understanding is that a public company belongs to nobody but to everyone who owns the shares. So when it is about to file for bankruptcy and its shares are being traded for a penny or two, would that not mean that whatever assets is left now(Office buildings, manufacturing facilities, tools, equipment....whatever belongs to the firm) have to be shared among the shareholders, because they are in fact the owners, right?

    I have a few more questions but will save them for after you guys shed some light on this. Thanks.
  2. Banjo


  3. 1) A lot of upcoming IPO's should consist of "financial garbage".
    2) The shares are wiped out, delisted and worthless.
    3) Nobody wants to be the first to sell out their shares at 1-penny.
    4) Whatever assets are remaining will end up in the hands of tax authorities and creditors for partial settlement. It's unlikely the shareholders will get anything from a final liquidation. :(