GM General Motors Company

By David Benoit and Mike Colias 

General Motors Co. is facing pressure from investor David Einhorn to boost its languishing stock price.

Mr. Einhorn's Greenlight Capital Inc. wants the auto maker to split its common stock into two classes: one that pays dividends and a second that would entitle its holders to all earnings, including stock buybacks, after the dividend is paid, according to people familiar with the matter.

Greenlight believes the move could attract new investors who are willing to pay more for potential earnings growth, potentially boosting the auto maker's market capitalization by as much as $38 billion, the people said. GM's market value currently stands at around $52.2 billion, according to data provider FactSet, and currently pays an annual dividend of $1.52 per share.

A GM spokeswoman called the proposed share structure "unprecedented and untested" and said it creates risks that are "unacceptable" and "aren't in the best interest of our shareholders."

Mr. Einhorn believes GM isn't getting credit for either its earnings potential or its dividend payouts, the people said.

GM has benefited from an unprecedented seven-year rise in U.S. auto sales since the financial crisis, while prolonged low gas prices have fueled demand for the company's high-margin pickup trucks and SUVs. The nation's largest auto maker posted $12.5 billion in operating profit last year -- its second straight record -- with the lion's share coming from North America, its primary truck market.

Yet its shares trade only about 6% above the price investors paid when it returned to the market in 2010 after its government-backed bankruptcy. The stock trades at the lowest valuation in the S&P 500, measured by the price compared to its expected earnings-per-share. Its dividend yield, meanwhile, is among the top 25 in the index.

Mr. Einhorn believes GM's management is doing a good job operating the business and isn't pushing GM to change its capital spending plan, as other investors have previously, the people said.

Write to David Benoit at david.benoit@wsj.com and Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

March 28, 2017 10:55 ET (14:55 GMT)

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