On Tuesday, General Motors reported that Harry Wilson, one of the most prominent shareholders, notified the company that he plans to nominate himself as a candidate for the board at the GM annual meeting, while also to push the company into spending $8 billion on a share buyback program.
The company’s common stock is substantially undervalued, the company is substantially overcapitalized and this repurchase of undervalued shares will create substantial shareholder value,”
wrote Mr. Wilson,43, in a letter handed over to the company Monday. Last, May, he had called GM shares “woefully undervalued.”
Mr. Wilson’s latter proposal comes at odds with the GM’s CEO Mary Barra’s plan to preserve a cash safety net for the company. However, the shareholder, who is a member of the task force that prevented GM from filing for bankruptcy protection in 2009, is backed by four hedge funds.
Mr. Wilson also notified the company on Monday that his proposals were supported by Appaloosa Management, Taconic Capital Advisors, Hayman Capital Management and HG Vora Capital Management. The five own together nearly 34.4 million GM shares (about 2.1 percent of GM stock).
The company declined to discuss on the proposals. However, it announced recently that it was acting in the best interests of its shareholders. But experts said that the company is struggling with lack of liquidity since it needs nearly $25 billion in cash to return to shareholders.
So, Wilson seems to plan to solve some of the company’s problems by nominating himself for the board at this year’s annual shareholders’ meeting in June. He also announced that he would nominate other people to join the board, whose 13 members are all up for election in 2015.
Last week, GM’s Chief Financial Officer announced that the company will return more cash to its investors in the second half of the year, while the company will maintain its cash between $20 billion and $25 billion. Additionally, GM will raise both the quarterly dividend and annual capital spending plan by 20 percent, i.e. to $9 billion.
But Mr. Wilson doesn’t seem to be content with the actual pace of cash return to shareholders, so he plans to accelerate it a little bit, according to financial analysts. Experts also believe that the automaker would adopt a buyback plan for half the value proposed by Mr. Wilson’s group.
Appaloosa Management expressed its full support for Mr. Wilson’s proposal, and urged the company to “refrain from acrimony” since Harry Wilson would be an effective shareholder advocate on the board.
Image Source: Sleek Money
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