Greenlight Capital selected three directors to General Motors board on Wednesday and alleged the company of misrepresenting to rating firms the prominent hedge fund’s proposal to divide the car manufacturer’s common stock into 2 classes.
Greenlight manager David Einhorn informed Reuters the automaker has refused to permit him to provide his proposal to credit companies for an official evaluation of how the strategy would impact the company’s credit danger.
“We believe the credit rating process has been unjustly manipulated,” Einhorn stated. “We call on GM to enable us to work straight with the credit rating agencies.”
GM fired back that any suggestion the automaker had failed to find Greenlight’s proposal completely with the ratings firms was unwarranted and careless.
Einhorn went public with a proposition in late March that the automaker produce one class of stock that pays a dividend and one that does not, but would be tied to GM’s possible growth.
The move would decrease the company’s cost of capital, enhance financial flexibility and boost market capitalization by as much as $38 billion, Einhorn stated.
No other GM shareholder has yet supported Einhorn’s proposal, with Warren Buffett’s Berkshire Hathaway Inc remaining notably silent.
GM has rejected Einhorn’s proposal, saying it would not assist the automaker “sell more vehicles, drive higher success, or generate greater cash flow.” Both Moody’s and Standard & Poor’s have stated such a structure might harm its credit rating.
When asked whether Einhorn’s claims on Wednesday modified anything, an S&P Global Ratings spokesman referred Reuters to the agency’s previous viewpoint from late March.
The views of the rating firms are a crucial element in the proxy fight that will play out over the next a number of weeks, unless GM and Einhorn can reach an agreement.
Einhorn stated during an interview that his strategy would likewise enable GM to maintain more of its money reserves, at a time when some experts are concerned the U.S. vehicle industry is heading into a cyclical downturn.