Old GM stock is worthless

General Motors will be issuing new stock, a signal that the company is emerging from the ashes like the mythical phoenix.

There is much to celebrate with this public offering. The corporate giant and employer of 209,000 people worldwide successfully emerged from bankruptcy in July 2009. It was a hallelujah moment when GM repaid its taxpayer-backed loans five years ahead of schedule.

And now, the company is selling 365 million new shares of common stock for $33 per share. The initial public offering allows the U.S. government to begin selling its majority stake in the company.

But investors who are holding the old GM stock are probably not so elated. Their stocks are nearly worthless, except to those who sell shares to lock in their losses for tax-deduction purposes. If you are still holding GM shares issued before the company filed for Chapter 11 in June 2009, so sorry, but you lose. You are not entitled to receive the newly issued shares in exchange for what you are holding.

It also won't be good news to naive investors who loaded up on the old GM stock after the bankruptcy filing, thinking they might profit from GM's soon-to-be IPO.

When companies can't meet the listing requirements to trade on the New York Stock Exchange or Nasdaq, they are delisted. However, shares can still be traded on the OTC Bulletin Board or Pink OTC Markets, formerly known as Pink Sheets, the electronic quotation system that provides pricing and financial information for stocks sold over the counter.

Initially, the old stock was listed over the counter under the ticker symbol GMGMQ. To avoid investor confusion, FINRA halted trading in old GM on July 10, 2009, and gave the old stock a new ticker symbol, MTLQQ. In both cases, the letter Q at the end of the ticker symbol indicates a company is under bankruptcy protection, which should be viewed as a huge warning sign for investors. The old bankrupt GM is now known as the Motors Liquidation Co. It is separate and distinct from the new General Motors.

If you do an Internet search for MTLQQ, you'll find some sites are pumping the stock. On Tuesday, more than 17 million shares of the penny stock were traded, reaching a high during the day of 29 cents per share. The day before, the penny stock price surged 17 percent. The stock has traded at a 52-week low of 6 cents and as high as 88 cents, according to MarketWatch.

Often in situations like this, people will pump up the stock of well-known bankrupt companies with the hope that less-informed investors will also buy, figuring they can reap the rewards when the company emerges from bankruptcy. In the end, it's only the pumpers who make a profit.

So if you're trying to make a quick buck before the new GM stock is issued, consider yourself warned that in the end, your investment could go up in flames.

The Financial Industry Regulatory Authority, or FINRA, which regulates securities firms, recently issued a warning about the old GM stock.

"With the news that the IPO was happening, we did some Internet searches and realized there continues to be confusion about the stock of old GM," said Gerri Walsh, FINRA's vice president.

Walsh said she saw posts from investors asking what would happen to their stock after the IPO. Others asked if they would be able to cash in on the new offering.

"The answer is no," Walsh said. "People have to recognize purchasing a stock of a bankrupt company is speculation, and you can lose all of your money."

Contact Michelle Singletary, a personal finance columnist at The Washington Post, at singletarym@washpost.com.