David Einhorn's Psychedelic GM Share-Class Gambit Still Way Ahead Of Its Time

Perhaps this is one of those ideas that will be appreciated only posthumously.
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Sometime back in March, a bolt of divine inspiration struck David Einhorn. Staring blankly into the master-bedroom ceiling of his 10,000 square-foot Rye, New York mansion, he began to see brilliant lights and colors swirling above him. Out of the nebulous mass came a single jagged line arching across the room. Einhorn traced its peaks and valleys; he recognized it immediately. This was a five-year chart of GM. It did not please him.

einhorn-cosmic

Then, in a burst of verdant light, Einhorn saw the line split into a radiant fractal. There were dimensions unseen hidden within the simple linear form. Einhorn's eyes rolled back in his head and he began to mouth the words of a treatise. GM wasn't just a single stock. There was value locked away in some universe orthogonal to our own, a plane of existence where the nation's second-largest auto manufacturer had one stock for dividends and another for buybacks. Einhorn rushed to his computer in a sweat, banged out some notes, and forwarded them along to his assistant. This would be his masterpiece.

Alas:

General Motors Co. today announced that Glass, Lewis & Co., a leading independent proxy advisory firm, has recommended that GM shareholders vote FOR ALL of the Board’s nominees and AGAINST the Greenlight proposal at the Company’s 2017 Annual Meeting of Shareholders to be held on June 6, 2017.

Genius is not always recognized in its own time. And though Glass-Lewis has at times hopped into bed with a hedge fund activist, Einhorn's psychedelic foray is a bit much for the shareholder advisers. Some selections from the Glass-Lewis report:

  • “[Greenlight’s] security would likely negatively impact the Company’s financial flexibility, in our view.”
  • “In particular, the potential market for the dividend shares is unproven and there may be limited interest in a security of this nature.”
  • “Furthermore, this proposal is not intended to, and does nothing to address the underlying fundamentals of GM’s business.”

Keep dreaming, Green Lantern. They'll understand you someday.

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