Tuesday, May 22, 2012

David Einhorn's Ira Sohn Presentation - GO-UP

There are many great companies with great balance sheets that suffer from low valuation multiples in the current environment, when market participants have enormous appetite to pay for yield, but little appetite to pay for earnings. The traditional advice to such companies is to offer a dividend, but dividends often don't work. A stock with a low P/E multiple often just becomes a stock with a low P/E and an attractive dividend.
Rather than enduring low multiples, companies can create value for shareholders by taking advantage of the situation by creating a new type of preferred security and distributing it to shareholders. This new security, which we call Greenlight Opportunistic Use of Preferreds, or GO-UPs, would be perpetual preferred stock distributed directly to shareholders, so that shareholders would own and could separately trade both the GO-UP and the common stock.
Greenlight Opportunistic Use of Preferreds (GO-UP)
PDF of the presentation