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Resources and Advisory Services
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| Well, that didn't take long. One month, actually. This week, GM announced that it will repurchase $5 billion of shares by the end of 2016, and increase the quarterly dividend. Investor Harry Wilson will not seek election to the BoD. Exactly one month earlier, Wilson, representing four other investors with about 2% of the outstanding shares, notified GM of his intention to nominate himself at the upcoming annual meeting, and seek an $8 million share repurchase (below). We could not find any written agreement between GM and Wilson, so it looks like he will just stand down. He worked with GM on the news release, calling the resolution "successful." Successful how?
- GM and Wilson avoid the hassle and expense of a proxy contest
- GM hangs on to more cash than it might have expected
- The four investors gained about 3% this week
- Wilson made perhaps $2 million in fees, between a 2% incentive payment on a 3% gain, and management fees since February 9.
This makes sense to us, too. Wilson probably would not have won the BoD election. And, GM could afford more than $5 billion. Yet, he persuaded the company to begin a reasonable program to return cash to investors, and achieved his stated goal for investors.
Not bad for a month's work.
MRL
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| GM and its investors have been through a lot, of course, in the past few years. Now, for the first time since its reorganization, the company confronts a serious activist situation. And, what a situation it is. Since its reorganization, GM has become a cash machine, and one of our top ten cash hoarders. As of 12/31/14, it has about $28 billion in cash and $9 billion in debt. As one investor put it recently, "Sitting around with $25 billion in your pocket getting zero percent on it just doesn't make any sense to me." Now, investors want some of that cash back. Four major hedge funds, with about 2% of the shares, have hired a top banker-turned-activist to do just that. Whether Harry Wilson succeeds, and GM repurchases more shares, remains to be seen. GM's initial response promises to make it lively. We read the agreements between Wilson and the funds, and explain in a current blog post. |
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