GM stock falls sharply to another new low

August 22, 2011 http://detnews.com/article/20110822/AUTO01/108220394

GM stock falls sharply to another new low

DAVID SHEPARDSON
/ Detroit News Washington Bureau

General Motors Co.’s stock hit a new low Monday since it went public, with its shares falling more than 4 percent in heavy trading before recovering slightly.

The Detroit automaker closed at $21.71 a share, down 2 percent or 45 cents a share, with more than 26.9 million shares trading hands, after falling as low as $21.18.

Monday’s closing price was the first time GM closed below $22 since it went public at $33 a share in November — a 34 percent decline. The stock rose as high as $39.48 earlier this year.

Since July 22, GM stock is down 28 percent.

The company’s market capitalization is $34 billion — less than the $35 billion in cash on hand.

The markets — which have fallen broadly in recent weeks — paid little notice to GM’s $2.5 billion in second-quarter profits.

The sell-off has also hurt the federal government’s 26.5 percent equity stake in GM. The government has recovered $23.1 billion of its $49.5 billion bailout. At current trading prices, the government would lose about $16 billion of its GM bailout. It needs to get an average of $53 a share to break even on its remaining 500 million shares.

Ford Motor Co. rose 2 cents a share to $10.01, up 0.2 percent. That’s still near its 52-week-low of $9.81. Ford shares have fallen nearly 25 percent since July 22.

Auto stocks have been taking a beating — in part because of a series of analyst reports reducing forecasts for second-half auto sales. Investors are also worried about the possibility of a double-dip recession.

Deutsche Bank auto analyst Rod Lache said in a research report Monday that the broader stock fallout could hurt GM and Ford’s pension plans. He predicts both plans will generate no return. Lache cut his earnings forecast for GM to $4.30 a share from $4.40 and the target price to $36.50 from $40.

He also reduced Ford’s earning forecast to $1.42 a share from $1.57 and reduced his price target to $15.50 from $16.50.

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