General Motors Co said on Saturday that proxy advisory firm Institutional Shareholder Services has recommended that shareholders vote against a slate of directors proposed by hedge fund Greenlight Capital and reject the hedge fund's plan to divide GM shares into two classes.
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The advice from ISS is a setback for Greenlight and its manager David Einhorn. They have argued that GM shares are undervalued and would be more attractive if the company divided its common stock into shares that pay a dividend and shares that would reflect the automaker's growth potential.
GM shares closed Friday at $33.07, just seven cents above the 2010 initial public offering price for shares issued following the automaker's federally funded bankruptcy.
A representative for Greenlight wasn't immediately available for comment.
Greenlight also has proposed a slate of three candidates for GM's board of directors. They are Leo Hindery Jr., a veteran telecommunications industry executive, Greenlight executive Vinit Sethi, and William N. Thorndike Jr., managing director of Housatonic Partners, a private equity firm.
On Friday, advisory firm Glass Lewis also advised against Greenlight's nominees for the automaker's board and its plan for restructuring GM's shares.
Glass Lewis and ISS have agreed with GM management's view that Greenlight's plan to restructure the company's common stock creates risks that outweigh its potential benefits.
According to GM, ISS said Greenlight had not made "a compelling case that change at the board level focusing on the implementation of its proposal is warranted.”
GM's annual meeting is June 6 in Detroit.
(Reporting By Joe White; Editing by W Simon)