The proposal by Greenlight Capital to institute two share classes of common stock stems from the idea that this structure can unlock vast amounts of shareholder value in lieu of the standard one share class currently in existence.GM’s general business characteristics – a mature business, a high dividend yield (~4.4%), yet a low amount of earnings is actually paid out as part of the dividend (~25%) – make the proposal a viable method of extracting more value for stockholders. This gives the idea of having a fixed-dividend share class that locks in the $1.52 dividend (the 4.4% yield) and a “capital appreciation” share class that provides no dividend but offers the upside of earnings (or net buybacks) beyond the dividend. The fixed-dividend share almost functions as a debt-like instrument at a lower cost of capital while the capital appreciation share would be subordinated below it and benefit from any residual claim after the dividend. The value gain for shareholders would be contingent on a couple factors:1. The extent to which GM earns in excess of the fixed dividend amount (or the value delivered from share buybacks)2. The degree to which capital appreciation share investors would increase their return expectations in light of the fact that they’re now subordinated under a different common share class.If we take the current dividend of $1.52 per share, this comes to $2.39 billion in total annual dividend payouts using the number of fully diluted shares outstanding. GM would essentially be on the hook for paying this out each year as part of the dual class system. If we assume this dividend grows by 1% per year (conservative estimate), discount this cash flow at the dividend yield + 100 bps (to account for increased risk due to its subordination below all debt), this would come to a value of $50.5 billionUsing my personal assumptions on the company, GM is valued at around $34 per share at the median, which would value GM’s market cap at $53.4 billion. (WACC is 5.50%; range developed from WACC adjustments over the 5.00%-6.00% range and long-term growth rate, g, adjustments +/- 20 bps above and below 1.80% assumption.)Accordingly, if the capital appreciation share class is able to squeeze out another $2.9 billion worth of accretion, this would be a net benefit to shareholders. An extra $1.00-$2.00 in EPS beyond the fixed dividend in perpetuity (also growing by 1% per year), discounted back at 10% (this is 100 bps beyond the discount rate used to estimate the current single class of common stock), would provide values of $18.9 and $37.8 billion, respectively.This would estimate the aggregate value creation at between $12-$31 billion. For this plan to breakeven, GM would need to earn just $0.24 in EPS beyond the $1.52 dividend (i.e., $1.76 in EPS in perpetuity). Main RisksThe main risks include additional credit risk and governance issues:1. Given the fixed-dividend payment is perpetual in nature, this share class would operate very similarly to a debt instrument. Credit rating agencies are likely to treat such a share class almost entirely as a debt obligation.2. On the topic of governance, with two separate share classes, management would have to attend to the demand of stockholders who are both motivated by different incentives. The fixed-dividend shareholders would be motivated by the need to maintain the dividend, which would suggest a preference for a conservative operational and capital allocation plan. The capital appreciation shareholders would be motivated by the need to earn as much in excess of the dividend as reasonably possible and would push for more aggressive operational and investment initiatives.ConclusionConsideration of a plan that could work to boost shareholder value, while ensuring capital costs don’t rise from a credit downgrade and that governance challenges remain workable for both parties, is in the interest of both GM’s management, board, and shareholders. It’s uncertain whether GM’s management is open to a modified proposal and will likely be a topic up for discussion at the annual shareholder meeting on June 6, 2017.