Greenlight Capital is oen of the main shareholders in General Motors Co. The hedge fund has recently nominated three professionals as directors of the board. At the same time, Greenlight reproached General Motors for its lack of enthusiasm for the proposed stock plan. Once again, the investment group won’t back down on its intention to split the GM’s common stock into two sectors.
GM Denied Greenlight Access to Its Credit Agencies
David Einhorn, the manager of Greenlight Capital, is not content with General Motors Co. On Wednesday, the businessman declared that the company denied him the opportunity to present his stock plan to credit agencies. Einhorn intended to offer a formal view on how this strategy would affect the future of company’s credit risk in a positive way.
“We think the credit rating process has been unfairly manipulated. We call on GM to allow us to work directly with the credit rating agencies.”
General Motors responded to this statement that the hedge fund showed no sign of collaboration. The automaker claimed that it proposed several edits to the stock plan. However, Greenlight Capital refused to endorse them for the presentation to the agencies. For the moment, no other shareholder of GM has backed up Einhorn’s plan. A conspicuous fact is that even Berkshire Hathaway Inc. preferred to remain silent for the time being.
Eihorn’s Stock Plan Consists of Spliting the Stock into Two Classes
Essentially, Einhorn’s vision is to act proactively and improve market capitalization. His strategy revolves around the creation of two classes of common stock. One of them would be in charge of covering dividends. However, the other would do no such thing. On the contrary, the second class would invest in the growth of General Motors. The executive is confident that this direction is going to propel the value of the automaker on the stock market to $38 billion.
On the other hand, General Motors clearly delimited its own professional opinion about this strategy. The company does not endorse Einhorn’s stock plan. On the contrary, GM believes that the change would trigger no extra car sales, would not improve cash flow, and it would not generate greater profitability. Standard & Poor’s, as well as Moody’s, are also of the opinion that this new direction might only impair the credit rating.
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