By on November 10, 2008

“Shares of GM fell 23% to $3.34 in late-morning trading,” The Wall Street Journal reports. “After earlier hitting a 62-year low of $3.02, as analysts at both Barclays Capital and Deutsche Bank cut their target prices and investment ratings on the stock. Barclays now targets GM shares at $1, while Deutsche Bank slashed its target price to zero… Deutsche Bank analysts, who cut their rating on the stock to ‘sell’ from ‘hold,’ gave GM a shorter liquidity timeline, saying the company might not be able to fund its operations beyond December. Even with government intervention, the analysts said GM’s future is ‘bankruptcy-like,’ and shareholders are unlikely to get anything.”

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22 Comments on “Deutsche Bank Rates GM Shares at Zero...”


  • avatar
    alex_rashev

    Ahh, I wonder if one can still get a paper copy of their shares. Would make wonderful wallpaper.

    I knew I should have entered the stock market this summer with the sole purpose of shorting GM stock. Wouldda bought me a nice new Corvette at one of their supersale events.

  • avatar
    SaturnV

    Ouch! A zero dollar target price – how often does that happen? Even a $1/share price puts them in danger of de-listing. I have to think that’d be something of a death knell for GM in its current incarnation.

    -S5

  • avatar

    And all this goes down while Toyota gets “Saved By Zero.”

  • avatar
    MattVA

    Regardless of what you think of GM, isn’t this wildly irresponsible of Deutsche Bank?

    By rating the stock price at $0, their analysts are saying there is no chance of GM surviving. While, I’m sure many people believe there is a high chance of GM not surviving, that would still leave a target price above $0.00. Rating the stock at $0 appears to be irresponsible forecasting.

  • avatar

    Dangit Sajeev you got my zinger.

    Anyway, this is a total burn for GM, yowch. Not that they don’t deserve it, of course, but their downfall is going to ripple out and hit this struggling economy hard (duh). I don’t think any level of government funding is going to help these clowns, not as long as Wagoner and his crew are in charge.

  • avatar
    NickR

    MattVA…there job is to forecast what an existing share is likely to be worth in the near future. Bankrupcy, or the terms and conditions of a huge bailout, make a figure of ‘$0’ highly probable.

  • avatar
    Pch101

    By rating the stock price at $0, their analysts are saying there is no chance of GM surviving.

    Sounds to me as if they are doing their jobs.

    I would say that it’s the opposite — it would be irresponsible to see any value in the stock.

    When considered as an investment, the only reason to believe that GM stock is worth more than zero is because you believe that the latest turnaround plan is going to work. If you assume that the stock value is based upon future earnings and you see no future earnings and an end to the company, then the stock really does have no future value.

    As a speculator, you might wish to play if you believe that the bailout is going to happen and/or if a takeover is possible. But that isn’t investing, and not something that an analyst should recommend.

  • avatar
    GS650G

    if there is any irresponsibility in this, it can be found in RenCen. just think, Stemple got bounced for having a bad year that was nothing like a single bad quarter today.

  • avatar
    Bozoer Rebbe

    Robert,

    What a pleasant surprise to see the Zero logo! I hope I’m not the only TTAC reader who is a fan as they’re a great band, perhaps a little bit on the hippy-dippy side, but great fun. Sadly, Martin Fierro, their sax player (Sir Douglas Quintet/Doug Sahm, session work w/ the Grateful Dead), passed away from cancer this past spring. Steve Kimock is a world class improvisational guitar player. His playing is lyrical, he’s written some great melodies and has terrific taste in what he covers. He also thinks my idea that a medley of Favorite Things and Take Five would work. And yeah, guitar players get the babes – Steve’s wife Jenn is gorgeous.

    If anyone’s interested in checking Kimock out, there are some free mp3 downloads available at http://www.kimock.com, including some recent Zero and some of Martin’s last gigs.

    Caveat: I’ve supplied embroidered apparel to a couple of Kimock’s bands and have hung out with them after shows. Speaking of which, I lived in Ann Arbor for 9 years, hold a US patent on a bong, and have known some professional growers, but Marin County rock musicians have access to some truly remarkable cannabis.

  • avatar
    MattVA

    What I’m saying is Highly probably does NOT translate to $0. Highly probable would translate to something like $0.10 a share.

    Deutsche Bank is being numerically dishonest. Pch101, if there is speculative value in the stock as you say, then the target price should not be $0.00. Speculative value is still a value.

  • avatar
    Pch101

    Speculative value is still a value.

    It shouldn’t be to an analyst.

    Investing and speculating are different animals. An investor decides to buy or sell based upon the assumption that the stock price will be determined by some multiple of earnings. The choice to invest is based upon what you believe the earnings will be, and what investors in the future would pay for them.

    Speculation is a bet on price movements. The reason for the price increase is irrelevant; the only issue is whether you buy at the right time and sell at the right time to get the movement.

    An analyst like DB is attempting to wear the former hat, not the latter. Their job is not to speculate.

    Speculators know better than take this stuff at face value, and will trade accordingly. But buy-and-hold investors would be crazy to hang onto this stock in the hopes that it has any upside in it. The real shame is that they didn’t make this recommendation a long time ago, otherwise they could have saved some people a lot of money.

  • avatar

    DB probably has clients holding oodles, and are covering their asses in anticipation of the plug being pulled.

    Imagine, soon I can buy GM for $0!

  • avatar

    When Toyota started to run those “Saved By Zero” ads, this wasn’t what they had in mind right?

  • avatar
    Martin Schwoerer

    That DB rates GM at 0 is surprising to me, because analysts don’t normally say that kind of thing (unless they are talking to clients, in private).

    But here’s what I found even more surprising: at a conference by Automobilwoche ten days ago, analyst Arndt Ellinghorst of Credit Suisse said an insolvency of GM was “totally inconceivable, and if it happened, would take several years”.

    That guy is probably so happy to still have a job he doesn’t mind ruining his reputation.

    Ah yes, he did add a qualifier: the “U.S. auto industry will not survive if it does not offer innovative products.”

  • avatar
    Bozoer Rebbe

    With the financial meltdown, we know that the ratings agencies that evaluated risk on bonds and other investments screwed the pooch pretty badly. Why should we think that DB analysts are any more accurate prognosticators than the ratings agencies?

  • avatar
    OldandSlow

    It’s like watching a train wreck in slow motion. What comes after the combined Chapter 11 and bail out scenario? A smaller GM?

  • avatar
    Lichtronamo

    DB is saying the either by bankruptcy or Fed bailout (i.e., AIG), current stockholder value is likely to be wiped out.

  • avatar
    mpc220

    I knew I should have entered the stock market this summer with the sole purpose of shorting GM stock.

    Easier said than done. I tried several times throughout the last two months and haven’t been able to get a locate.

    You could buy the puts, but the premiums are very high.

  • avatar

    As Lichtronamo implies, a share price of zero doesn’t mean that GM will go away.

    It simply means that the value of the stock will go away.

  • avatar
    Detroit-Iron

    Like I said about Chrysler, give me $5-$10 for beer money (-$5 @ $0 per share ~ infinity shares) and I’ll take GM off your hands. I really couldn’t do any worse if I tried.

  • avatar
    jybt

    See? See what happens when you delay the Cruze and Camaro?

    You’ve got the Cruze out in Korea now, and the Camaro is possibly one of the best products to come from Detroit in a long time. You’ll kill the Mustang with it!

    The time for “delays” are gone – if these cars are not released now, they won’t ever make it to market. Don’t just sit back and die – you might lose the money faster by releasing them now, but you at least will have a shot at surviving.

    If you’ve “wised up” in the last couple years since 2007, you’d do the right thing, GM. There is still time….

  • avatar
    fallout11

    Well said, Pch101. Always love your posts.

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