GM Shares Plunge on Executives' Sell-Off

By Peter Whoriskey
Washington Post Staff Writer
Wednesday, May 13, 2009

Shares of General Motors plunged to their lowest levels since the depths of the Great Depression yesterday following news that six GM executives sold off their company holdings.

Share prices in what was once an American corporate icon ended the day at a mere $1.15, a 20 percent drop for the day, as it seemed increasingly likely that stockholders could be left with nothing -- or close to it -- in the coming weeks.

If the executives "don't have confidence in the company, why should anyone else?" said Efraim Levy, a Standard & Poor's equity analyst who focuses on the auto industry.

The Obama administration and GM officials are at work on a plan to shrink and strengthen the company by June 1. But neither of the announced paths toward that goal -- a bankruptcy or an out-of-court restructuring -- would yield much for the company's current shareholders.

Even at the newly depressed value, many analysts consider current shares overpriced. If, as company chief executive Fritz Henderson has said is likely, the company files for bankruptcy protection, shareholders would be largely wiped out. If the company averts bankruptcy through a proposed restructuring, existing shareholders would get just 1 percent of stock in the revived company.

Given that shareholders will get wiped out or nearly so in either scenario, analysts have said they're surprised that the share price has remained above $1. "It's been like Harry Houdini's best levitation trick," Levy said. But now "it's falling to Earth."

At its lowest ebb yesterday, GM shares fell to $1.09, which is the lowest level the stock has hit since April 28, 1933, according to the Center for Research in Security Prices at the University of Chicago.

Shares of Ford also dropped yesterday, falling 18 percent to $5.01, after the company announced that it would issue 300 million shares of common stock to raise capital.

Among the GM executives who sold off stock, the most notable was Bob Lutz, the company's former vice chairman and head of product development, who sold 81,360 shares for $130,990. The other executives selling off stock were group vice presidents Ralph J. Szygenda and Carl-Peter Forster, Vice Chairman Thomas G. Stephens, GM North America President Troy A. Clarke, and manufacturing executive Gary L. Cowger.

In total, the six executives had sold off more than 200,000 shares at between $1.45 and $1.61 a share.

Those values are a small fraction of the price the company commanded just a year ago, when it was over $20 a share.

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