General Motors Corp. stock plunged to just $1 a share Wednesday on growing fears of a pending bankruptcy filing and the decision of several senior executives to liquidate their personal stakes.

The stock recovered slightly in extremely heaving trading to close at $1.21 a share -- up 5.2 percent, or 6 cents. But it is still down 25 percent since Friday.

The Detroit automaker faces the possibility of being delisted if it falls below $1 for an extended period and experts say it could be removed from the Dow Jones Industrial Average or the Standard & Poor's 500 index.

On Monday night, GM disclosed that six senior executives had sold nearly 205,000 shares of GM stock for between $1.40 and $1.61 a share -- a move that sent the stock tumbling.

But at the same time, other executives -- including GM CEO Fritz Henderson and Chief Financial Officer Ray Young, who could have legally opted to sell their holdings -- declined to do so.

GM spokeswoman Julie Gibson noted the company has disclosed that it will either file for bankruptcy or restructure in a way that will significantly dilute current shareholders.

Ford Motor Co. closed Wednesday at $4.96, down 5 cents or 1 percent. Ford shares had been trading above $6 a share on Monday when the company offered 300 million new shares for sale -- a move that will dilute existing shareholders. But Ford is still worth $14.3 billion.

GM proposes to give current shareholders just 1 percent of the equity in the company, while awarding 89 percent to the Treasury Department and United Auto Workers' health care trust fund. GM has offered to swap the remaining 10 percent equity for at least 90 percent of the $27.2 billion held by unsecured bondholders.

Last month, the manager of GM's employee stock fund sold all shares of GM stock on fears the company could be forced to file for bankruptcy. The shares were sold over 25 days at an average price of $1.87 a share. The GM stock fund covers nearly 30,000 employees and other plan participants. They held about 75 million GM shares -- 12.5 percent of the Detroit automaker -- in their 401(k) plans.

Sen. John McCain, R-Ariz., said the decision by the GM executives to sell their shares was a clear indication that the company was likely to file for bankruptcy.

"They are obviously going to have a pre-structured bankruptcy, something they should have done before tens of billions of dollars of government money was spent," McCain said.

GM has obtained $15.4 billion in government loans and is seeking another $11.6 billion in additional loans.

GM was for decades the largest corporation in the world -- and until last year the largest automaker in the world. GM has been in the Dow Jones Industrial Average since 1925 and was an original member of the predecessor of the S&P 500 -- the Standard Services index of 90 stocks created in 1925 -- and the 500, created in 1957.

GM had a market capitalization of $52 billion in 2000; today it's worth $740 million.

Despite the stock swoon, neither Dow Jones nor S&P said it was immediately planning to remove GM from the indexes.

John Prestbo, editor and executive director of Dow Jones Indexes, said GM is still contributing to the index.

"Our job is to run an index, not to run a popularity poll for stocks; and in our view, at this point, GM is helping the Dow tell the story of the stock market," Prestbo said.

GM would only learn it was being removed from the index "minutes" before it was announced publicly, Prestbo said.

In July 2008, Standard & Poors removed GM from its S&P 100 index of the nation's largest publicly traded companies -- but left GM in the S&P 500 -- as it had fallen to the 354th largest company in the index.

David Blitzer, managing director of the index, said Wednesday GM is now the 497th largest company in the index, as measured by market capitalization. It's just ahead of Eastman Kodak at 498, and behind the New York Times Co. and Office Depot as among the smallest companies in the index.

About $1 trillion is held in S&P 500 index funds and index holdings typically account for about 10 percent of the outstanding shares of the companies, Blitzer said.

Blitzer said GM, or any other company that filed for bankruptcy, would be quickly removed from the index.

"We watch the index on an ongoing basis but we also don't comment on a forward-looking basis," Blitzer said, saying the index is aware of GM's problems.

It is difficult to envision a type of investor who would buy GM's stock right now, considering six top executives sold more than 200,000 company shares last week, said David Sowerby, portfolio manager at Loomis Sayles & Co. LP in Bloomfield Hills.

"It is very hard to imagine, even for the high risk taker, the same type of person who when he plays poker consistently tries to draw an inside straight," Sowerby said.

One scenario might lure some investors, though, he added.

"If there was some last-minute, unusual deal where the company did not file (bankruptcy) and some equity holders were preserved," he said.

Detroit News Article