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Feb.20

2:58 PM ET

Friday, 20 Feb 2009

GM Shares Crater

Posted By:Phil LeBeau

Sectors:Oil and Gas | Technology | Automobiles and Parts

Companies:Toyota Motor Corporation | General Motors Corp | Honda Motor Company, Ltd. | Ford Motor Company

Halfway through the trading day, GM [GM Loading... () ]shares hit levels not seen since 1938.

Shortly after 1 pm, they dropped under $1.60 a share (down 19% for the day) and GM's market cap slipped below $1 Billion. To put this fall into some perspective, consider that GM's market cap in 1929 was $4 Billion. At this level, according to Global Financial Data, GM should probably be moved to the S & P 600 Small Cap Index.

Why the sell off today?

There is a growing concern among investors that GM shares will eventually be worth $0 because the stock will be diluted if GM successfully converts a sizable chunk of it's debt into equity stock. Buckingham Research estimates GM's current 732 Million outstanding shares could balloon to more than 15 billion if GM completes a debt for stock exchange. 15 Billion shares! Would you want to own a 100 or 1000 shares of company with 15 Billion outstanding shares?

Bottom line: A lot investors are starting to wonder if GM stock is worthless.