Buying Penny Stocks – General Motors Edition?

It seems both counter intuitive and just plain odd to discuss one of the nations oldest and largest corporations on a site about buying penny stocks, but I guess it is just that kind of economic era.

The Detroit Free Press has this to say about the value of GM’s stock:

Another concern for GM is that investors will begin to consider GM shares a penny stock if the price stays below $5 per share for too long. Although several experts doubt that would occur with such a well-known company, GM shares have been below $5 consistently since November.

While this is the simplistic designation for a penny stock, it is still something to consider. This is a penny stock that could be traded with tremendous potential in the coming months.

Shares fell to $1.09 Tuesday morning but rebounded slightly, ending the day down 20%, at $1.15.

The drop to $1.09 was the lowest GM shares have been since April 28, 1933, according to the Center for Research in Security Prices at the University of Chicago.

Experts have said that GM’s stock is overpriced, considering that the automaker’s debt-restructuring plan will leave current shareholders with just a 1% stake in the reconstituted company.

“We see an increased likelihood that the shares will decline as the company’s viability-plan deadline approaches,” Efraim Levy, an analyst with Standard & Poor’s Equity Research, said in a note.

GM’s debt-restructuring plan calls for GM to issue about 60 billion new shares in exchange for debt. Then, GM will immediately do a 100-for-1 reverse stock split, in which shareholders would get one new share of GM for every 100 they currently own.

Now this isn’t a suggestion you run out and buy GM right now or anything. But you might keep a shrew eye on it. This is the rare economic era where trading penny stocks online can become a big game for even the most serious of investors.