Investor Presses GM on Its Stock Split -- WSJ

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 [e-mail] and Anne Steele at [e-mail]

(END) Dow Jones Newswires

April 13, 2017 02:47 ET (06:47 GMT)

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