Greenlight Capital’s video presentation titled, “Unlocking Value At General Motors.” It is rare for Greenlight to go active last time we can recall was with Apple – so this is atypical and deserves some notice ioho.
See video and slides below.
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Introduction
- Greenlight Capital is a value-oriented, research-driven investment management firm
- We are a long-term stockholder of General Motors Company (“GM” or the “Company”)
- We are currently the 5th largest public holder, owning 3.6% of the common stock
Our interests are aligned with those of all GM shareholders
Reasons for Greenlight’s Investment in General Motors
- General Motors is a great company that generates attractive cash flows and profits
- GM is particularly well situated in North America
- Leading market position in trucks, SUVs and CUVs, which are taking share from sedans
- Upcoming multi-year period of strong new product introductions will drive price and mix benefits
- GM has a strong and valuable business in China
- GM’s remaining loss-making international operations can be turned around, fundamentally restructured or sold as GM has done with its businesses in Europe, Russia, Australia, Korea, Thailand and Indonesia
- GM’s down-cycle earnings should outperform market fears, benefiting from the restructuring actions GM has taken to create a structurally lower and more flexible cost base
- GM is well situated to prosper amid industry developments including electrification, autonomous driving and ridesharing
- General Motors is significantly undervalued
Rather than waiting for an eventual downcycle to demonstrate the fundamental strength of its business, we believe GM should pursue constructive steps to fix its substantial undervaluation
Reasons for Greenlight’s Active Involvement
- The Company has generated a total return of only 17% since its November 2010 IPO, compared to an average return of 147% from its OEM peers and an S&P 500 return of 133%(1)
- We believe this is in large part the result of a culture that is loath to disrupt the status quo and resists steps to unlock shareholder value
- Recall that it wasn’t until receiving public pressure from shareholders in 2015 that General Motors began a share repurchase program and announced its much touted capital allocation framework
- When presented with an idea to unlock billions of dollars of shareholder value (the “Plan”), GM’s management team and Board retreated into a “not invented here” mentality, and retained financial advisors to discredit the idea
- We believe the management team then misrepresented the Plan to the credit rating agencies
- GM’s other objections to our Plan indicate a lack of basic corporate finance and capital markets understanding that is harming shareholders
GM’s Board needs to be enhanced to ensure it has critical capital markets expertise and a willingness to maximize shareholder value
GM’s Stock Is Not Fairly Valued Today
- Despite fundamentally strong operations, the stock has delivered poor returns since the Company’s IPO, and trades at a significant discount to intrinsic value
- The current P/E multiple (5.4x(1)) is the lowest in the S&P 500, and among the lowest of all global automobile manufacturers
- The dividend yield (4.5%(1)) is very high relative to the overall market and to GM’s conservative payout ratio (24%)
- General Motors’ dividend is not respected by the market
- General Motors’ investor base has a suboptimal combination of yield-oriented and value-focused shareholders with divergent investment objectives
Where Are We Today?
Shareholders Are Still Awaiting Upside
GM Trades at the Lowest P/E Ratio Among the S&P 500 and the Second Lowest Among Global Automobile Manufacturers
GM Isn’t Getting Credit for Its Strong Dividend Commitment…
See the full slides below.
