Greenlight Capital boss David Einhorn sent a letter to General Motors (GM) - Get Report shareholders on Tuesday reiterating his desire to see the firm create two share classes to increase the company's value, and one shocking metric stood out.
"Consider this simple fact," Einhorn implored shareholders. "GM has the lowest price-to-earnings (P/E) ratio of any of the 500 companies in the S&P 500. The incumbent board and management have failed to generate value for GM's shareholders since its IPO, despite an equity bull market. We believe that more of the same thinking and the same capital structure is unlikely to lead to an increased valuation.
Einhorn's fund quadrupled its GM stake the during the first quarter of the year to more than 54 million shares, or 3.6% of the company, according to quarterly holdings filings with the Securities and Exchange Commission.
Greenlight last month also sent a letter to GM shareholders highlighting what it said is a "gap between GM's stagnant share price and its intrinsic value." The fund noted GM completed its initial public offering at $33 per share in 2010 and now hovers at $34.
"As best we can tell, GM does not recognize its $34 stock price is a problem and has no plan to address the discount to its intrinsic value," Greenlight wrote. "Shareholders should not be as complacent or content as GM's management and its Board of Directors have been in addressing this discount."
GM's board has rejected Einhorn's proposal and is urging shareholders to vote against it at the June 6 meeting. The automaker in April trimmed CEO Mary Barra's compensation ahead of the shareholder vote.
In his first-quarter letter to investors, published by ValueWalk, Einhorn acknowledged GM will be a "tough fight" but held "the math is on our side."
"We believe others recognize that the stock is deeply undervalued," he said.
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