General Motors has rejected a non-binding proposal that Greenlight Capital intends to submit for a vote at the automaker's 2017 annual meeting of shareholders.
The proposal relates to eliminating the dividend on the existing GM common stock and distributing an unprecedented new dividend-focused security, thereby creating a dual-class common stock structure. Greenlight has also nominated four candidates for election to GM's board.
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GM said eliminating the dividend on the existing GM common stock and distributing the proposed new 'dividend security' creates an unacceptable level of risk and would not serve the best interests of its shareholders.
Risks include the loss of GM's investment grade credit rating; unknown and uncertain market demand and liquidity for the proposed securities, resulting in depressed pricing and selling pressure; unproven and entirely speculative valuation impact; and governance challenges arising from two classes of stock with divergent objectives.
"GM's board and management are fundamentally transforming our company by executing a plan that is delivering record financial and operating results and returning significant capital to our shareholders," said Mary Barra, GM chairman and CEO. "For seven months, we've extensively reviewed the proposed dual-class structure, as well as other capital allocation strategies, and concluded that continuing to execute our strategy and adhering to our current disciplined capital allocation framework is the best path to deliver increased value.
"Our board and management remain laser focused on advancing our progress and creating value for our owners by enhancing our portfolio and our operations, leading the future of personal mobility and driving strong performance. In contrast, the proposed structure creates an unacceptable level of risk for our company and its shareholders."
