Greenlight Capital’s letter to General Motors shareholders for the month of May 2017.
To Our Fellow Shareholders of General Motors Company:
The annual meeting of the General Motors Company (“GM”) is early next week.
You have a choice to make. You can vote the GREEN proxy card and DEMAND CHANGE or you can use the white proxy card and surrender to the incumbent Board’s inertia and status quo plan. We believe the choice is clear: there is nothing to lose from insisting on fresh thinking at a company whose stock trades at its 2010 IPO price.
GM’s Board believes that nothing can be done proactively to create value for shareholders. In our experience, the uninspired take refuge in convincing themselves they are helpless.
We do not agree that the path to fair value at GM inevitably involves waiting out the next recession. GM has many ways to resolve its capital structure problem. Greenlight has offered one creative approach to unlocking tens of billions by splitting the current common stock into two common equities (the “Plan”). There may be other approaches as well. Of one thing we are certain: if shareholders do not insist on action, GM’s incumbent Board will do nothing new. They are content to wait.
We are very disappointed with the proxy advisors’ recommendations to vote the white proxy card. After 7 years of a flat stock price, how much longer must shareholders wait? Glass Lewis’ analysis stated that “Greenlight raises valid concerns regarding GM’s valuation relative to peers and the broader market,” and that “the dividend shares could likely be structured in a way that does not impact the Company’s credit rating.” Incredibly, Glass Lewis still believes that GM’s Board deserves reasonable deference.
Institutional Shareholder Services (ISS) concluded that Greenlight had not presented a compelling case for board change, yet it also said that Greenlight “makes a valid point in stating that GM cannot wait for an industry downturn to prove to investors that it has turned the corner (emphasis added).” Further, ISS agreed that even if our Plan would solve some but not all of GM’s maladies, it would still be worth implementing. And even in ISS’ worst-case scenario, the Plan would still generate a higher combined price than today’s GM stock price. Thus, you should decide for yourself if you want to vote for change or for the status quo.
GM shareholders deserve better and Greenlight’s highly qualified Board nominees would provide fresh perspectives on how to fix this persistent valuation problem.
We need a dose of self-help. Greenlight has nominated three outstanding leaders with track records of shareholder value creation, who are not afraid to think unconventionally. At TCI and Liberty Media, Leo Hindery created billions of dollars in value for shareholders by using the balance sheet as a corporate asset, spinning off and selling businesses and creatively capitalizing others. Vinit Sethi helped create the Plan and as a representative of Greenlight, one of the largest owners of GM stock, will focus on creating value for all of us. Will Thorndike is a successful investor with significant board room and corporate governance expertise. Will’s book, The Outsiders, about creative CEOs who delivered enormous shareholder value by excelling at capital allocation is suggested reading at GM, and has been highly recommended by Warren Buffett and Charlie Munger.
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. Don’t wave the white proxy card.
Instead, you should send a message to this Board: Shareholders expect the directors to work tirelessly and creatively to fix GM’s inefficient capital structure, and to close the gap between the market value of GM and its intrinsic value. We know our nominees can contribute energy, fresh perspective and creativity, in addition to decades of experience. Submitting the GREEN proxy card is a vote for action and inspiration.
We encourage you to read our proxy statement, which contains biographies of our Board nominees, and to listen to our presentation about the Plan on our website at www.UnlockGMValue.com.
But most importantly, we encourage you to support our nominees and our Plan by voting GREEN. Given that time is short, please vote over the Internet or by phone today.
Only the last proxy card you submit counts. If you have already submitted a white proxy card to GM, it is not too late to change your vote. To revoke your prior proxy, simply submit a GREEN proxy card or vote by phone or internet. Follow the instructions on the voting instruction card. If you have any questions about how to vote, please contact our proxy solicitor, D.F. King at 1- (800) 252-8173 or email to firstname.lastname@example.org.