NEW YORK (TheStreet) -- A Georgia doctor says he lost about $23,500 after potentially misleading information on online brokerage E*Trade's (ETFC) (Stock Quote: ETFC) site led him to buy nearly worthless shares of Motors Liqudation (Stock Quote: MTLQQ) (MTLQQ) .
R.L. Davis, a 49-year-old doctor in Commerce, Ga., says he wanted "to play the stock market and to stick with reputable, established companies (and) that's what I thought I was doing" after reading the description of Motors Liquidation on the online brokerage firm's site.
In fact, the company is a bankruptcy court entity that holds assets and liabilities that the new General Motors did not want.
Under the heading "MTLQQ company overview" the E*Trade site says that Motors Liquidation "is engaged primarily in the development, production and marketing of cars, trucks and parts. It develops, manufactures and markets vehicles worldwide (while its) finance and automotive operations are primarily conducted through GMAC LLC which provides a range of financial services, including consumer vehicle financing, automotive dealership" and other businesses.
The last sentence of the 136-word section notes that substantially all of GM's assets were sold to new GM in bankruptcy court in July, but the relationship between Motors Liquidation and the sale of GM assets is not completely clear from the sentence.
Virtually the same overview or profile, which is a feed from Reuters, is posted on the sites of E*Trade competitors Ameritrade (Stock Quote: AMTD) (AMTD) and Scottrade, along with similar news stories about new GM as well as Ford (F) (Stock Quote: F) and the auto industry.
As a repository for assets and liabilities that remain to be liquidated in bankruptcy, Motors Liquidation has virtually no relationship with new GM, which emerged from bankruptcy on July 10.
(AMTD) (F) As part of the bankruptcy process, shares of Motors Liquidation continue to trade, and may rise and fall, until they are wiped out when the liquidation is completed. That will leave shareholders with zero.
Davis says he paid $87,010 for 158,299 shares for Motors Liquidation, purchasing shares on July 21 and July 22 for between 47.5 cents and 52 cents apiece. He sold all of his shares on July 28, after reading on TheStreet.com that the SEC is looking into trading of the worthless shares. After selling his shares for about 40 cents each, he walked away with $63,355. The shares closed Friday at 50 cents, virtually unchanged.
E*Trade spokeswoman Pam Erickson says the company's site provides a variety of information that ought to make it clear to investors that trading in Motors Liquidation is risky, including the last sentence of the overview. "Most investors would clearly understand that a company that has been directed to sell all its assets would be a very high risk investment," she says.
She says investors with self-directed brokerage accounts should understand that they are responsible for their investment decisions.
Davis says he started investing several months ago, and did well at first. Told that a lot of people view doctors as lousy investors, he responded, "I think you're right."
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