Just because a stock is listed on an exchange, Cramer said Monday, doesn’t mean the underlying company is viable. In fact, he can think of a few household names that traded long past their expiration date.
A lot of these companies continued to sell on the open market because the exchanges themselves — and the brokers — made money on the transactions. Even though companies like General Motors, American International Group , Fannie Mae and Freddie Mac were on life support, they still registered daily volumes in the tens of millions of shares, which put cash in certain people’s pockets.
But that’s wrong, Cramer said. These “zombie securities,” as he called them, should be cancelled.
Take GM. This company entered bankruptcy and the government all but took over. But still it was allowed to trade, even though the old common stock was going to be canceled and exchanged with new shares issued to the new owners. Cramer called it “the height of irresponsibility” to allow this to continue when even GM’s bondholders were going to lose out. And remember that bondholders get their money before anyone else when a company is going under.
The same sort of thing happened in Fannie and Freddie, too. Investors were buying and selling their shares when they were all but public trusts. Cramer blamed the regulators, specifically the SEC, for letting the public trade these stocks when other governments never would. They were such a sucker’s bet by that point that he likened them to a fixed horse race.
“And sadly,” Cramer said, “Wall Street is far more lightly regulated than any type of gambling.”
The bottom line: Sometimes even the most recognizable companies should be banned from the market.
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