Hedge fund Hayman Capital takes stake in GM: report

DETROIT (Reuters) - Hedge fund Hayman Capital has taken a stake in General Motors Co and believes the U.S. automaker's stock could rise more than 40 percent over the next 12-18 months after the U.S. Treasury sells its stake in the company, Bloomberg reported on Wednesday. The stake Hayman Capital Management LP has taken in GM is one of the Dallas-based hedge fund's largest investments, Bloomberg said, citing a unidentified person familiar with the matter. GM shares were up 2.7 percent, or $1.02, at $39.16 in afternoon trade on the New York Stock Exchange. J. Kyle Bass, managing partner and founder of Hayman, who in a presentation online called GM a "compelling" investment, could not immediately be reached to comment. GM declined to comment to Reuters. A spokesman told Bloomberg the company was not aware of any position Hayman had taken. "GM equity represents one of the most compelling risk/reward situations of any large cap in the world today," Bass said in a presentation posted on the website HVST.com. "Detroit is back. And GM could lead the way forward on the equity front." Treasury has said it will exit its remaining GM stake of about 2 percent by year end, and investors expect the automaker to initiate a common stock dividend and ramp up stock buybacks once that has occurred. The U.S. government inherited a 60.8 percent stake in GM after the taxpayer bailout and bankruptcy reorganization in 2008 and 2009. It has sold off blocks over the last several years. In his presentation, Bass said he believes Treasury's exit would remove selling pressure on the stock and likely result in a "meaningful dividend and/or buyback program" within 45 days. He also cited the benefit of the continued rollout of GM's redesigned full-size pickup trucks as well as next year's launch of the new versions of the large SUVs based on the same platform, both highly profitable vehicle lines. Bass said GM trades at a "significant discount" to its peers and the stock could rise at least 25 percent in the next 12 months and more than 40 percent over 18 months. He said in the presentation that GM should at least trade in line with its peers. GM trades below 3 times earnings before interest, taxes, depreciation and amortization (EBITDA), while Ford Motor Co trades at 4.4 times EBITDA, Bass said. "A strong case can be made that GM should trade at a premium to the group given its unique position and strong underlying fundamentals, a best‐in‐class leverage to global growth markets, improving operational efficiency from ongoing turnaround efforts and an improving product cadence," Bass said in the presentation. Bass has been taking on new positions in the last months including making bets on ailing retailer J.C. Penney and software maker Microsoft. Regulatory filings show that Hayman Capital owned 5.7 million shares of J.C. Penney stock at that end of the third quarter and 1.5 million shares of Microsoft. He also owns a stake in Herbalife, the nutrition and supplements company hedge fund manager Bill Ackman is betting against. Even though Bass' fund is on the small side, his prominence as a manager is outsized in part because of his early bets against the overheated housing market and his vocal criticism of Japan. He earned more than half a billion dollars on his bet against subprime mortgages and was profiled in writer Michael Lewis' book "Boomerang". GM has been popular with other hedge funds as well and at the end of the third quarter David Einhorn's Greenlight Capital had 10 percent of his portfolio invested in the company, owning 17 million shares, according to regulatory filings. Davidson Kempner Capital Management and Moore Capital, among others, also owned stakes. (Reporting by Ben Klayman in Detroit and Svea Herbst-Bayliss in Boston; Editing by Alden Bentley, Bernard Orr)