Debate over GM stock-split plan heating up

The debate over an activist investor’s stock-split proposal is getting more intense with one week to go until General Motors’ annual shareholders meeting in Detroit.

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, which 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 Wednesday, Greenlight urged shareholders to send a message to the GM board ahead of the June 6 meeting.

“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. Supporting the incumbents, who have failed to unlock value for seven years, is tantamount to surrendering,” according to the Greenlight letter.

Einhorn owns 52 million GM shares, or just over 3% of the company’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 the advisory firms — Glass, Lewis & Co. and Institutional Shareholder Services (ISS) — describe 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,” according to a portion of the Glass Lewis report referenced by GM.

The ISS report, according to GM, said the company had 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 suggest shareholders reject the Greenlight proposal and approve the company’s nominees to the board.