Proxy fight over GM stock heats up ahead of annual meeting

Shares of General Motors are rising Tuesday as a proxy fight escalates between the company and an activist shareholder who wants to split its shares into two classes.

David Einhorn's Greenlight Capital said Tuesday that it's sending a letter to shareholders emphasizing that the stock price has barely grown since GM's initial public offering at $33 seven years ago.

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GM pointed out last week that two independent corporate evaluation firms, ISS and Glass Lewis, recommended against the proposal. The company says the stock split is too risky and the company has returned capital to shareholders.

Shares of GM rose almost 2 percent to $33.59 in late-morning trading Tuesday.

Greenlight's plan would create one dividend-paying stock and one "capital allocation" stock designed for growth. The hedge fund, which owns 3.6 percent of GM's shares, argues that its plan unlocks tens of billions of value in the company's stock. Greenlight also is nominating three directors for GM's board.

"There is nothing to lose from insisting on fresh thinking at a company whose stock trades at its 2010 IPO price," Greenlight's letter says.

GM, however, says that by the end of this year it will have given $25 billion back to shareholders since 2012. The stock currently pays a 4.6 percent annual dividend.

In its evaluation, ISS said that the dual stock structure proposed by Einhorn would set up conflicts of interest between dividend and capital appreciation shareholders with different objectives. "The negative outcomes associated with the proposed dual class share structure combined with the lack of visibility regarding value creation for shareholders drive our recommendation against the dual class proposal," ISS wrote, according to materials provided by GM.

Votes on the proposal and directors will take place in one week at the annual shareholders meeting on June 6.