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GM may issue up to 60 billion new shares.
GM may issue up to 60 billion new shares in an attempt to wipe out its debt.
The debt-for-equity plan, which would see the US government become the auto giant’s major shareholder, would evaporate GM’s debts to its main creditors: the government, the United Auto Workers union and current bondholders.
However the move would also decimate the current stock price, which is unlikely to please current shareholders.
GM stock – which has slid about 43 per cent this year – would drop from its current price of US$1.85 to little more than 1 cent.
The proposal, which has been filed with the US Securities and Exchange Commission, suggests that after the first debt-for-equity phase, GM would implement a 1-for-100 reverse stock split intended to return the value of the stock to near current levels.
The carmaker has asked the three primary creditor groups to forgive $43 billion in exchange for ownership.
