GM shareholders rebuff activist investor's attempt to split stock
Jun 07 2017
General Motors (GM) investors rejected activist investor David Einhorn's proxy campaign to split the automaker's shares into two classes by an overwhelming margin Tuesday, ending a boardroom skirmish that left many stockholders scratching their heads.
Based on preliminary results, GM on Tuesday reported Greenlight's dual-class common stock proposal was defeated with more than 91 percent of the votes cast against the proposal, or 96 percent excluding Greenlight's shares.
CEO Mary Barra said the automaker has been making the tough decisions necessary to adapt to changing business conditions and has been working hard to reward investors prior to the company's annual shareholder meeting in Detroit.
When asked whether GM needed to take drastic actions to convince Wall Street that its stock is undervalued, Barra said officials continue to right-size the business and invest in emerging technologies that it anticipates will lead to long-term growth and increased shareholder value.
Many expected the proposal to fail. GM is already executing a share buyback plan with its stock, but Einhorn wanted to effectively intensify that process. Barra told reporters in a press conference before the vote that management considered Einhorn's idea carefully, but decided they want to pursue other means to unlock value for shareholders. GM expects to return approximately $7 billion to shareholders in 2017, after returning about $18 billion between 2012 and 2016, Barra said. The company has made $42 billion in the past seven years.
Barra reiterates GM's plan to allocate capital at home and overseas only where there is evidence of future return on investment, evidenced by decisions to exit unprofitable markets such as Europe with its divestiture earlier this year of longtime German unit Adam Opel. He congratulated the management team on its latest "win".
GM's director nominees were overwhelmingly voted to the board garnering between 84 percent and 99 percent of votes cast.
Einhorn made his proposal as USA auto industry sales of new vehicles have begun to wane after a boom cycle that has lasted since 2010. The stock is up more than 13 percent over the past year. The board will remain the same at 11 members, with Barra as chairman.
GM was having nothing of it, repeatedly calling the scheme "financial engineering" and reminding shareholders that the major rating agencies said the Greenlight proposal would sink GM's investment grade status. GM shares traded on Tuesday at $34.25 a share, about 16% lower than when Barra became CEO, despite robust profits and a series of moves to sell or shut down money losing operations. Greenlight owns 3.6% of GM's stock, so Einhorn has understandably been looking for ways to get it moving.