General Motors Company (NYSE: GM)
General Motors was off to an overwhelmingly strong run in the market minutes ago, prompting our partners at Trade Ideas to alert us of the movement. The run was caused by news that Greenlight Capital made a request to unlock shareholder value through a split of the shares. However, as soon as the story broke, we saw a key reminder that investors are often the last to know. At the moment GM is trading at $35.53 per share after a gain of $0.82 per share or 2.36% thus far today.
Greenlight Requests A GM Share Split
In a plan announced today, Greenlight Capital said it reached out to General Motors in order to request a split to the shares. The split would create two classes, one that receives dividends and one that would participate in remaining earnings and cash flows as well as future growth of the company. In a statement, David Einhorn, President of Greenlight Capital, had the following to say…
“As significant, long-term shareholders, we believe in GM’s strong earnings potential. Our plan would unlock significant value and lower GM’s cost of capital. It would provide the company complete strategic flexibility without adding any default, refinancing, or balance sheet risk. We encourage our fellow GM shareholders to carefully review the presentation and to urge GM’s management and Board to adopt this compelling plan.
A Quick Response From GM
Apparently, this proved to be one of those, investors are last to know, cases. In fact, shortly after the news broke that Einhorn wanted a share-split, it was announced that GM had several meetings with Einhorn with regard to the split over the course of several months. They have decided after careful consideration to reject the offer. So, essentially, we are now learning about the offer because Greenlight Capital needs the backing of more shareholders to force the split.
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will be watching GM stock incredibly closely. In particular, we’re watching to see if more shareholders get behind Greenlight Capital, and if they can create such a buzz around the idea that the company is forced to move forward. Nonetheless, we’ll continue to follow the story closely and bring you the news as it breaks!
Update: GM responded to Greenlight Capital saying that it expects to return $7 billion to shareholders in the year 2017!
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