Greenlight Capital Inc.’s proposal to split General Motors’ stock was overwhelmingly rejected by the automaker’s shareholders.
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.
The hedge fund’s plan included dividing shares into one class that would have collected on the company’s dividend, and another that would have captured the value of its earnings.
Greenlight Capital’s three nominees for the company’s board also failed to garner enough votes. All of the GM board’s director nominees were elected with between 84 and 99 percent of the votes cast, the company said.
Following the announcements, GM shares fell 16 cents to $34.30 per share. The stock closed Monday up less than 1 percent to $34.46.
The vote ends months of campaigning by Greenlight founder David Einhorn, who did not attend the meeting, to split the stock. His firm — GM’s fifth largest shareholder with a 3.6 percent stake — insisted that the split would lower the company’s cost of capital and unlock between $13 billion and $38 billion of shareholder value.
Greenlight Capital, according to GM, was represented at the meeting. However, no one commented or made a statement during the meeting.
GM has adamantly opposed the proposal since it became public in March. It has encouraged shareholders to do the same.
“After careful consideration, we determined that Greenlight’s proposal is not in the best interest of our shareholders,” GM CEO and Chairman Mary Barra told media prior to the annual meeting starting.
The automaker has argued the split would create an unacceptable level of risk and would not serve the best interests of GM shareholders. “We believe that Greenlight’s flawed, high-risk proposal will not create additional value,” according to a statement on the company’s proxy website.
Several analysts as well as Moody’s and S&P have publicly sided with GM on the matter.
“While we believe that Greenlight’s frustration with GM’s sluggish stock is understandable given the company’s impressive execution since emerging from bankruptcy, we believe that the proposed share division would not ultimately achieve outsized incremental returns,” wrote Bank of America Merrill Lynch research analyst John Murphy in a March note to investors.
The catalyst for Greenlight’s proposal was frustration with the stock performance of GM, which has lagged the performance of the S&P 500 since the IPO in 2010. GM is one of several automakers to face mounting pressure from Wall Street, which has more recently favored high-tech disruptors such as Tesla Motors Inc.
Ford Motor Co. last month replaced CEO Mark Fields with Jim Hackett largely due to Fields not being able to move the company’s stock.
Greenlight also proposed three candidates for GM’s board of directors: Leo Hindery Jr., a veteran telecommunications industry executive, Greenlight executive Vinit Sethi, and William N. Thorndike Jr., managing director of Housatonic Partners, a private equity firm.
None of Greenlight’s representatives were elected to the board, according to GM.
GM had opposed the board appointments and urged shareholders to vote for the board’s recommended nominees.
Nine of 11 directors in the GM board are independent, plus Barra and former UAW Vice President Joseph Ashton, appointed by the UAW Trust.