DETROIT _ The rhetoric over an activist investor's stock-split proposal is getting more intense as General Motors' annual shareholder meeting, to be held June 6 in Detroit, draws closer.
GM is touting reports from two advisory firms that have sided with the company over the proposal from billionaire David Einhorn's Greenlight Capital. Einhorn wants to split GM stock into two classes, a move he says would unlock billions of dollars in shareholder value. GM, however, has painted the proposal as risky and has defended its efforts to transform the company in a changing auto environment.
But in a letter Tuesday, Greenlight urged shareholders to send a message to the GM board.
"The incumbent GM Board seems to us to be bereft of inspired ideas and we believe shareholders must make room for fresh directors who can help shareholders," he wrote in the letter. "Supporting the incumbents, who have failed to unlock value for seven years, is tantamount to surrendering."
Einhorn owns 52 million shares of GM stock, or just over 3 percent of GM's common stock. His proposal would create two stock classes: one designed for big dividend returns and another designed to reward shareholders if the automaker's profits and stock price grow.
But advisory firms Glass, Lewis & Co. and Institutional Shareholder Services described Greenlight's plan as speculative.
"We agree with the position of the incumbent directors that there are a number of risks and uncertainties associated with Greenlight's plan, that it is speculative in nature and that the potential costs may outweigh the potential benefits," Glass Lewis said in a report, according to GM.
The ISS report, according to GM, said the company has closed its performance gap with its rivals since Mary Barra became CEO in 2014 and "the market has not reacted positively to the dissident's proposal," a reference to Greenlight.
The firms suggested shareholders reject the Greenlight proposal and approve the company's nominees to the board.
Consternation over automotive stock price is not limited to GM. Last week, Ford announced it was changing CEOs even though the company had been profitable under the leadership of Mark Fields. The move to elevate Jim Hackett from his post running Ford Smart Mobility to the CEO post was touted as an effort to change the culture at Ford but was also seen as a reflection of concerns about the company's stock, which lost 40 percent of its value during Fields' tenure.
Seven years after bankruptcy, GM's stock has been trading close to its initial public offering price of $33 per share. The stock closed Tuesday at $33.53 per share, up 46 cents or 1.39 percent.
Although profitable, both Ford and GM have watched as electric carmaker Tesla has ridden a wave of expectations, with its stock closing Tuesday at $335.10 per share, up $9.96, or 3.06 percent, since last Friday.
