GM shares tumble to lowest level since depression

Shares of General Motors Corp. tumbled to their lowest level since 1933 Tuesday morning as investors feared significant dilution of their stock values or bankruptcy as the company approached a June 1 restructuring deadline.

In early trading, GM shares dropped to $1.09, the lowest level since April 28, 1933, according to the Center for Research in Security Prices at the University of Chicago. By midmorning they had rebounded to $1.12, still down 32 cents, or 22.2 percent.

GM has received $15.4 billion in federal loans and is a little more than two weeks away from a government-imposed deadline to finish a restructuring plan or be sent into Chapter 11 bankruptcy protection.

The company has said it would prefer to restructure out of court, but Chief Executive Fritz Henderson said Monday that bankruptcy is more probable with so much to accomplish and the deadline closing in.

GM has offered bondholders 10 percent of the company's equity in exchange for wiping out $27 billion in debt. The company also is negotiating with the U.S. government for a potential 50 percent share of GM stock, and with the UAW to take 39 percent in exchange for half of the $20 billion that the company owes the trust fund.

The remaining 1 percent would go to those who hold the company's current 611 million outstanding shares.

If the bond exchange goes through, GM plans to issue 62 billion new shares and then do a 100-for-1 reverse stock split. The whole deal would severely cut the existing shares' value.

In addition, GM said Monday in a regulatory filing that six top executives sold more than 200,000 company shares on Friday and Monday. A spokeswoman said they sold after the company warned that shareholders could see significant dilution if the stock swap goes through or lose their entire investments.

Executives selling stock include retiring Vice Chairman Bob Lutz, who disposed of 81,360 shares at $1.61 each for a total of $130,990. Vice Chairman Thomas Stephens and Group Vice Presidents Carl-Peter Forster, Ralph Szygenda, Gary Cowger and Troy Clarke sold smaller amounts.

On Monday, Efraim Levy, an auto analyst with Standard & Poor's Equity Research, wrote in a note to investors that there is increased likelihood of GM shares declining in value as June 1 approaches.

"In our view, either GM reaches a deal with bond and other stakeholders that will result in government ownership of about 50 percent of GM common and existing shareholders seeing their interests diluted to 1 percent stake, or, as we think is increasingly likely, GM will file for bankruptcy protection, making existing shares almost worthless," he wrote.