August 19, 2010 PSW Staff |
recent bankruptcy issues. The stocks are Pink sheets Washington Mutual, (WAMUQ) and Motors Liquidation Company, (MTLQQ), as well as OTC BB issue Fannie Mae, (FNMA). Although normally we are not very interested in these types of stocks, we thought we would use the opportunity to take a quick look at the three fallen giants, and see what, if any value exists in all of the paper thats been floating around. Bankruptcy stocks are completely worthless more often than not, mainly because when they finally do emerge from bankruptcy, Bondholders get paid first. This means that anything more than a 1-2 week time frame on these stocks would be excessively dangerous. These stocks are extremely liquid, however, and short term traders take them on wild rides day after day often without any news or developments. Wamu has climbed from 17 cents late last week to around 23 cents today with no real story. The company had 90 billion in debt and just about 10 billion in cash when they last filed. Shares outstanding approached 2 billion, and where they stand now is a bit more tricky. Shareholders have been demanding that the company hold an annual meeting. It has been since April of 2008 since Wamu has held any sort of shareholder meeting, that was five months before they filed for bankruptcy protection. The Washington Mutual collapse was the largest bank failure in U.S. history, and many shareholders would claim that it was the largest fraud perpetrated in U.S. history as well. Any trading or trying to put a value on this stock would be complete speculation. Motors Liquidation Company, formerly General motors has seen a similar increase in volume and positive action, and although there has been good news from GM, the current version of the stock may be even more worthless. GM recently announced that it is trying to sell new shares to the public after successfully emerging from bankruptcy, relatively unscathed. The shares will trade on the NYSE under the ticker GM. Unfortunately, MTLQQ has sold all of it's assets back to GM, and the second paragraph from their most recent 8-K basically says it all: "Upon the closing of the sale of substantially all of the Company’s assets to General Motors Company pursuant to Section 363(b) of the United States Bankruptcy Code on July 10, 2009, the Company ceased to have material operations. It is the Company’s strong belief that there will be no value at all for common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios." Fannie Mae is a little further along with there bankruptcy emergence, and their stock currently trades on the OTC BB, a small step up from the others, but is still just as risky. The company continues to need more and more money from the federal government to survive, and it's future existence remains in question. In a recent interview, liberal democratic Senator Barney Frank said "If we want to subsidize housing, we should do it upfront and let the budget be clear about how we are doing it." He also said that Fannie and Freddie should be abolished, but did not know what to replace them with. The stock has seen a substantial dip this week on heavy volume. |
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