Hi, need to submit a 250 words essay on the topic Principal of Finance 4.
Since a section of the bondholders is in retail investment, they might sell the shares and cause a temporary drop in the General motors’ stock price. This is according to David Whitson, who is an analyst with Morningstar Inc. based in Chicago. He also says that the investors have probably factored in the dilution that would result from the sales and therefore, General Motors’ value in the long term will remain unchanged. He reiterates that he values the shares at $48 each because of their release to bondholders.
The promise to the bondholders was made to help them cover some ground financially and investment wise, since they had made losses when the old version of the company declared themselves bankrupt (Welch, 2011). The warrants that were issued to the bondholders for the new General Motors stock are currently in the funds. This is according to Kirk Ludke, CRT capital group’s vice president’s report. This displays the edge bonds have over its peers in the financial market today.
Welch, David. “Old GM Bondholders Getting Shares in New General Motors May Depress Price – Bloomberg.” Bloomberg – Business, Financial & Economic News, Stock Quotes. N.p., n.d. Web. 20 Sept. 2012.
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