{"id":114894,"date":"2017-03-28T16:02:46","date_gmt":"2017-03-28T20:02:46","guid":{"rendered":"http:\/\/www.thedetroitbureau.com\/?p=114894"},"modified":"2017-03-28T16:02:46","modified_gmt":"2017-03-28T20:02:46","slug":"gm-squashes-proposal-to-split-stock-into-two-classes","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2017\/03\/gm-squashes-proposal-to-split-stock-into-two-classes\/","title":{"rendered":"GM Squashes Proposal to Split Stock into Two Classes"},"content":{"rendered":"
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David Einhorn, head of Greenlight Capital, wants GM to split its stock into two classes. He believes the move would nearly double the company's stock price.<\/figcaption><\/figure>\n

General Motors today rejected an investor-proposed plan that called for the automaker to split its common stock into two classes, suggesting the idea could harm the company.<\/p>\n

Billionaire investor David Einhorn, who runs Greenlight Capital, suggested that the company common stock into two classes: one that would receive the current dividends and a second that would participate in all earnings and future growth of the company.<\/p>\n

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Auto News!<\/figcaption><\/figure>\n

The rejection won\u2019t stop Einhorn, who is one of the world\u2019s best poker players, from submitting his proposal for a vote of the company\u2019s shareholders at GM\u2019s annual meeting later this year.<\/p>\n

If adopted, Einhorn claims, the company\u2019s share price would rise, cut its cost of capital thus improving its financial flexibility. He also suggested the plan would raise GM\u2019s market cap from $13 billion to $38 billion.<\/p>\n

(GM sells Opel to PSA Group for $2.5 billion. <\/em><\/strong>Click Here<\/a><\/span><\/strong> for the details.)<\/em><\/strong><\/p>\n

Einhorn, whose hedge fund has held GM stock for some time, says GM\u2019s stock \u201ctrades at a significant discount to intrinsic value,\u201d according to a recent presentation. He believes the \u201ctwo-stock\u201d plan would push GM\u2019s stock price from the mid $30 range where it currently sits to nearly $60 a share.<\/p>\n

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CEO Mary Barra said the proposal to split GM stock into two classes was too risky to adopt.<\/figcaption><\/figure>\n

\u201cCreating two classes of common stock will unlock GM\u2019s value by forcing the market to appropriately value the dividend and give credit for GM\u2019s earnings potential,\u201d according to Einhorn.<\/p>\n

GM officials said the plan was debated for more than six months, but executives ultimately rejected the plan because it was too risky. The issues included:<\/p>\n