Investor Presses GM on Its Stock Split -- WSJ
April 13 2017 - 3:02AM
Dow Jones News
By Mike Colias and Anne Steele
Investor David Einhorn ramped up pressure on General Motors Co.
to split its common stock into two classes, as he proposed
candidates for the company's board and accused the Detroit auto
giant of misrepresenting his proposal to investors and ratings
firms.
In a filing Wednesday, Mr. Einhorn's hedge fund, Greenlight
Capital Inc., said GM hadn't given his plan a fair vetting and has
tried to undermine it by misleading rating firms, which have warned
that the dual-class structure would hurt GM's credit rating.
Greenlight's proposal on two share classes was submitted publicly
in mid-March after several months of meetings with the auto maker's
management team behind closed doors.
"GM is ignoring the significant value unlocked by our plan, and
has concocted a ratings issue by presenting a one-sided and flawed
analysis to the rating agencies," said a statement from Vinit
Sethi, partner and director of research at Greenlight. Mr. Sethi is
being put forth as one of three board candidates.
Last month, GM's board rejected Greenlight's proposal to create
two classes of common stock that would separate its dividend from
its operations, a move designed to attract new yield-hungry
investors and those looking for growth. GM shares have languished
despite two straight years of record earnings.
On Wednesday, GM reiterated its view that the stock split would
harm its investment-grade credit rating, which it spent years
restoring following the auto maker's 2009 bankruptcy. Shareholders
will vote on the proposal at GM's annual shareholders meeting,
which is expected in the first half of June.
Greenlight's campaign marks the second time in recent years that
GM Chief Executive Mary Barra has faced outside pressure to make
certain changes. In 2015, an investor group pushed the company to
undertake share buybacks.
All three major ratings firms in March said the Greenlight
proposal would be credit-negative to GM and could lead to a
downgrade. Moody's said splitting the stock would saddle the car
company with a "sizable cash-outflow burden that would diminish the
financial flexibility necessary in the competitive and highly
cyclical auto market."
GM on Wednesday said it had presented Greenlight's proposal to
the ratings firms "fully and fairly," and that "they understood the
idea in all its facets."
In addition to Mr. Sethi, Greenlight named as candidates Leo
Hindery Jr., managing partner of InterMedia Partners and former
chief executive of Tele-Communications Inc., Liberty Media and
AT&T Broadband; and William N. Thorndike Jr., founder of
private-equity investment firm Housatonic Partners and chairman of
Consol Energy.
Mr. Thorndike's 2012 book, "The Outsiders: Eight Unconventional
CEOs and Their Radically Rational Blueprint for Success,"
chronicled executives who oversaw massive returns through smart
capital allocation and is viewed as something of a bible among
activist investors. GM's capital and how to boost the stock will be
front and center in Greenlight's fight, and Messrs. Hindrey and
Thorndike may be seen by some as specialists in that area.
David Benoit contributed to this article.
Write to Mike Colias at Mike.Colias@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 13, 2017 02:47 ET (06:47 GMT)
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