Way to treat your shareholders, General Motors

Obama administration: "I got a majority stake in GM!"
UAW: "I got a big piece of GM, too!"
Joe Bondholder: "My piece is kinda small, but it's better than nothing."
Joe Shareholder: "I got a rock."

The title of this post implies that this insane idea originated with GM, but given the beneficiaries, and given the fact that this plan will totally destroy investor confidence in the company, I'm seeing the Obama administration's fingerprints all over the place.

Reuters states the facts rather plainly, but can't scare up an adjective stronger than "unusual" to describe the plan:

General Motors on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM's shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM's stock investors with just 1 percent of the equity in a restructured carmaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed on Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM's restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM's existing shareholders would see their stake in the 100-year-old automaker all but wiped out.