GM Bankruptcy Watch: The Stock Price

General Motors seems almost certain to file for Chapter 11 protection within days (or hours), yet somebody is still buying the company’s stock—even though it would essentially be wiped out the moment GM declares bankruptcy.

Sure, the share price has steadily fallen for months, to pitiful levels barely above a dollar. But as most shareholders have been selling, buyers have been on the other end of those trades. Just look at the stock chart for a given day, and notice the upward squiggles disrupting the stock’s downward movement; each of those upticks represents buyers temporarily driving up the price, if only by a penny or two, before the stock resumes its sad spiral.

[See 30 investors poised to lose the most on GM.]

Data compiled by Thomson Reuters through mid-May shows that big investment firms like Vanguard, Northern Trust, Barclay’s and Charles Schwab have been net buyers of GM stock in 2009. Maybe they’ve been gambling that GM will pull off a last-minute miracle and somehow avert bankruptcy, or that the U.S. government, about to become GM’s biggest shareholder, will bang some heads and hammer out a deal. Maybe they just think that GM stock is so cheap it can’t hurt to buy a few shares of this once proud blue-chip firm. Maybe it’s pure, pathetic nostalgia.

Buying GM stock at a buck isn’t crazy, even now. Not long ago, many analysts thought Ford would follow GM and Chrysler into the government’s arms – and then into bankruptcy – but Ford has managed to turn its own ship around. Grabbing a few customers fleeing the other two domestic automakers hasn’t hurt. If you got the timing right and took a chance on Ford in mid-February, when its stock was sweeping the gutter at about $1.50 a share, you’ve already made a tidy little sum. Ford’s now trading at about $5.30, so 100 shares bought at the February low for $150 would be worth $530 now, a 250 percent return in three months.

[See 6 upsides to a GM bankruptcy.]

Even lowly AIG has been a decent investment this year. After the revolting bonus scandal broke in March and AIG became a bigger public enemy than al Qaeda, it’s stock fell almost as low as a stock can go, bottoming out at 33 cents a share. It’s now back solidly into the low single digits, at one point cresting $2 per share in early May. Its recent closing price of about $1.70 represents a 415 percent return since March.

The odds of GM pulling out of its beeline toward bankruptcy seem slight—but greater than zero. If by chance it happens, GM stock will surely spike. To $3? $5? $10? We’ll probably never know. But a few investors out there would sure like to find out.