Motors Liquidation Company (MTLQQ.PK) is the
zombie stock representing what has been discarded by the old
General Motors . As its name implies, the
liquidation company is being shepherded through bankruptcy
liquidation, and its shares are completely worthless. To be
clear: Its fair value is $0.00, not a penny more.
Don't just take my word for it
Here's what the company itself claims: "Management
continues to remind investors of its strong belief that there
will be no value for the common stockholders in the
bankruptcy liquidation process, even under the most
optimistic of scenarios."
And the U.S. Securities and Exchange commission agrees:
"Motors Liquidation Company is currently winding its way
through bankruptcy court -- and there is a real possibility
that stock holders will receive nothing from these
proceedings. While the common stock of Motors Liquidation has
not been cancelled, investors should not interpret that as
indicating that the shares have any value."
It doesn't get any more obvious than that
Both the company and the government acknowledge that
the stock is worthless. In spite of that, the recent price of
$0.61 apiece for its shares gives the company nearly a
$400 millionmarket cap. That is insane. There is no
rational or logical basis behind that kind of valuation.
Yet it's there. And with millions of shares trading in any
given day, that irrational pricing persists in spite of heavy
enough volumes that the shares clearly aren't suffering from
a lack of liquidity. There's only one conclusion that you can
rationally draw from what's happening with Motors
Liquidation's stock:
The market is nuts.
What efficient market?
If nothing else, what's happening with Motors
Liquidation should drive a stake through the heart of
whatever's left of the Efficient Market Hypothesis. There is
absolutely no way that the company's fair value is anywhere
near where it's trading in the market. Yet if the market were
efficient, the market price would have to be linked with the
company's intrinsic value.
But hey, what's $400 million between friends? Rounding
error, right?
So what?
While what's happening with Motors Liquidation is an
extreme example, the market is often driven to wild swings
and emotional excesses, on both the upside and the downside.
Just take a gander at the moves among these fairly large and
well-known (and followed) stocks over the past 52 weeks:
Company
52-Week High
52-Week Low
Low to High Swing
Google (Nasdaq: GOOG)
$561.64
$247.30
127%
JPMorgan Chase (NYSE: JPM)
$47.47
$14.96
217%
Chevron (NYSE: CVX)
$81.92
$29.30
180%
Goldman Sachs (NYSE: GS)
$193.60
$47.40
308%
Schlumberger (NYSE: SLB)
$71.10 Continued... |