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David Einhorn, the activist hedge fund manager, is trying to grab four seats on the board of General Motors, the car maker says.

Mr Einhorn’s Greenlight Capital has instigated a proxy battle in an attempt to get the company to agree to an unusual financial restructuring, according to a combative company statement rejecting the idea.

Greenlight wants GM to split its share in two: one new share would pay dividends, to satisfy income investors; the other would scrap the payout and focus on share buybacks. The hedge fund went public with its plan in a presentation.

But GM came out fighting, telling shareholders to reject Greenlight’s nominees and explaining why it dismissed the share split idea. In a statement it said:

The proposed dividend security would not help GM sell more cars, drive higher profitability, or generate greater cash flow — nor would it address the fundamental sector factors affecting GM’s stock price.

It also listed a litany of other risks, namely:

The loss of GM’s investment grade credit rating;

Unknown and uncertain market demand and liquidity for the proposed securities, resulting in depressed pricing and selling pressure;

Unproven and entirely speculative valuation impact; and

Material governance challenges arising from two classes of stock with divergent objectives.

Earlier, Mr Einhorn had said:

Our plan would unlock significant value and lower GM’s cost of capital. It would provide the company complete strategic flexibility without adding any default, refinancing, or balance sheet risk.

Copyright The Financial Times Limited 2017. All rights reserved.
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