Skip navigation
Newswire

UPDATE 1-Investors unimpressed by Einhorn's GM share class plan -survey

(Updates Einhorn's holdings)

By Svea Herbst-Bayliss

BOSTON, March 31 (Reuters) - Investors have given billionaire hedge fund manager David Einhorn's plan to boost General Motors Co's value a frosty reception with most surveyed saying his call for two types of shares would not raise the automaker's worth, according to an Evercore ISI poll.

Einhorn, who runs hedge fund Greenlight Capital, this week proposed that GM create two classes of stock, one that pays a dividend and one that does not, to boost the No. 1 U.S. carmaker's languishing share price. More investors would buy the shares, helping boost the company's market capitalization, Greenlight contended.

But 53 out of 61 investors surveyed by investment banking advisory firm Evercore ISI said they did not believe Greenlight's proposal would lead to value accretion at GM. In fact, a significant majority of investors polled - 48 people, or 80 percent - said Einhorn's plan could jeopardize the company's credit rating. Of the investors surveyed, 34 percent were GM shareholders.

Greenlight on Friday called the survey "fundamentally flawed" and through a spokesman said it failed to understand the firm's plan to unlock value at GM.

GM rejected Einhorn's plan, saying it had reviewed it for seven months but considered it too risky.

Evercore ISI surveyed investors after Einhorn, whose Greenlight Capital has owned GM shares on and off for five years and has a 4.9 percent stake in GM, including options, released his presentation in a regulatory filing on Tuesday.

Now Einhorn is taking his plan to GM shareholders more broadly through a proxy contest where he hopes to win seats on the board. Investors will vote on board members at the upcoming annual meeting and Einhorn would need to quickly mobilize many large owners to agree with his proposal in order to win enough votes for his slate.

While a number of investors in Einhorn's own fund have applauded him for coming up with this novel approach, no major GM shareholder has yet publicly thrown their weight behind the plan.

Warren Buffett's Berkshire Hathaway Inc, which is GM's sixth largest investor with a 3.34 percent stake, has remained silent about Einhorn's proposal. Greenlight Capital is the 17th largest investor.

Nearly all those polled, or 93 percent of investors, said they were satisfied with GM management's plan to return some $7 billion to shareholders this year, through share buy backs worth $5 billion and $2.2 billion in dividend payouts.

GM's stock is currently trading at $35.46 and it pays an annual dividend of $1.52 per share.

(Additional reporting by Nick Carey; Editing by Andrew Hay)