Frustrated with the lackluster performance of one of its
largest holdings, Greenlight Capital’s David
Einhorn proposed a radical plan to steer General
Motors’ stock back into the fast lane. The
activist investor posted on his hedge fund firm’s
website a 15-page case for GM creating two classes of stock:
one that would pay a dividend and one that would presumably be
on a growth track. His argument: the market is not fully
valuing the stock, which has a dividend yield of 4.4
"GM’s investor base has a suboptimal
combination of yield-oriented and value-focused shareholders
with divergent investment objectives," the presentation states.
Einhorn’s plan, the company would spin off
"dividend shares" and pay the current dividend. The existing
stock would be entitled to the earnings in excess of dividends
declared on the dividend shares, including all future growth,
"Creating two classes of common stock will unlock
GM’s value by forcing the market to appropriately
value the dividend and give credit for GM’s
earnings potential," Greenlight asserts in the presentation. It
figures the two stocks combined would be worth between $43 and
$60 per share and unlock value ranging between $13 billion and
$38 billion. Shares of GM surged 2.45 percent on Tuesday, to
close at $35.56. At year-end, GM was Greenlight’s
third-largest disclosed U.S. long position. The hedge fund firm
also had a significant position in GM call options.
In a statement, GM said: "Careful due diligence, including
consultation with the rating agencies and independent analysis
from three top-tier investment banks, the board and management
are confident that 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 GM shareholders."
Meanwhile, Moody’s Investors Service said in a
new report issued Tuesday that Greenlight’s
proposal would be "credit-negative for GM and its subsidiaries"
and "represent a significant departure from the
company’s current financial strategy," which it
calls "well-defined and publicly-communicated" and led to the
recent upgrade of GM’s ratings.
Buffalo Wild Wings, under assault by activist hedge fund
Marcato Capital Management, announced it has retained The
Cypress Group to help boost the value of the casual dining
company. The investment banker that specializes in restaurants
and franchises is being hired to market about 10 percent of
Buffalo Wild Wings company-owned restaurants.
"This initial sale process represents the first phase of the
Company’s ongoing portfolio optimization process,"
the company adds in a
In response, an incredulous Marcato said in a
press release that it had retained Cypress last year to
study the feasibility of refranchising at Buffalo Wild Wings.
"We strongly believe that a shift to a highly-franchised
business model is not only feasible, but also creates
substantial value for Buffalo Wild Wings shareholders over the
long term," Marcato states. "Even with the Cypress
Group’s support of the feasibility of
Marcato’s refranchising proposal, we remain
concerned that Buffalo Wild Wings will continue to resist this
Shares of Buffalo Wild Wings rose nearly 1 percent on
Tuesday, to close at $146.60.
Och-Ziff Capital Management sank solidly to a new low
price, dropping more than 3 percent on Tuesday to close at
$2.22. There were no new developments at the embattled
multistrategy hedge fund firm, whose debt was downgraded last
week by Standard & Poor’s.