While currently holding the top market share position in retail auto financing, Ally Financial said late on Monday that it will appoint a new independent director to its board of directors in a strongly worded announcement where the chairman described how executives “are frustrated with the market perception reflected in the price of Ally’s stock.”

Ally indicated this new independent director will be identified in consultation with Lion Point Capital, as well as some of Ally’s other largest shareholders. Ally said it expects to appoint the new director no later than June 30.

The appointment will expand the board to 12 members.

“Adding a highly qualified and independent director to our board demonstrates Ally’s continued commitment to diverse perspectives and sustainable shareholder value creation,” Ally chairman Franklin Hobbs said. “Our inclusion of shareholder input in this process reflects our commitment to strong corporate governance.”

Back in January, Ally responded to demands from Lion Point Capital — a hedge fund that previously had advised Ally that it holds less than 1 percent of Ally’s common stock — in a development Hobbs called a “clear agenda to force a sale of Ally.”

At the beginning of the year, executives noted Ally’s Compensation, Nominating and Governance Committee and its full board previously concluded that Ally stockholder value would not be enhanced by the creation of create a strategic alternatives committee. They insisted at the time that Ally’s business and financial fundamentals and prospects were strong, and that it would be a “highly disadvantageous time” in the business, market and regulatory cycle to pursue a sale transaction.

But then late on Monday, the Ally board of directors announced that it amended the company’s bylaws to permit shareholders holding at least 25 percent of Ally common stock to call a special meeting, as well as to provide for majority voting in uncontested director elections.

These changes were effective as of Wednesday. 

Ally explained its upcoming proxy will include updates to executive compensation policies, which will be directly connected to the company’s financial and operational performance, to better align management’s and shareholders’ interests.  The Ally board’s Compensation, Nominating and Governance Committee is also continuing to explore programs to further ensure the alignment of these interests. 

In connection with these developments, Hobbs said in a company press release that, “Ally has undergone tremendous transformations over the past several years, and today has the strongest auto finance franchise in the U.S., with a simple and clean balance sheet. 

“Ally’s portfolio contains high-quality secured loans generated via strict underwriting standards and has demonstrated effective risk management and consistent profitability,” he continued. “Our leading direct bank also continues to grow in importance with several important new products to be rolled-out through the course of 2016.”

Then came perhaps Hobbs’ most intense comment.

“We are frustrated with the market perception reflected in the price of Ally’s stock and the current discount to book does not reflect the inherent value of this company,” he said. “Management expects to announce a number of new initiatives that will drive value creation over time and further position Ally for strong, long-term performance. 

“Being a disciplined steward of capital remains at the forefront of our decisions, and there is much more potential to be realized in this company. We are all aligned in our commitment to maximize shareholder value both operationally and strategically,” Hobbs went on to say.

According to the latest State of the Automotive Finance Market Report, Experian Automotive pegged Ally with the largest market share of all retail financing providers as of the fourth quarter. Ally’s share stood at 5.75 percent; just a shade above Wells Fargo Dealer Services, which came in at 5.66 percent.

Stance from Lion Point Capital

SubPrime Auto Finance News reached out to Lion Point Capital representative to obtain their reaction to Monday’s developments.

In light of what the hedge fund described as “the positive steps taken and commitments made by Ally,” Lion Point Capital chose to withdraw its director nominations and shareholder proposal.

“We are pleased that Ally Financial has committed to add a highly qualified new independent director to its board of directors in consultation with Lion Point Capital and the company’s other largest shareholders,” the hedge fund said.

“We are also encouraged that Ally has moved to strengthen its corporate governance policies and focused upon further aligning executive compensation with the financial performance of the company and the shareholders’ interests,” the firm continued.

“Lion Point looks forward to the long-term success of Ally, as well as a continuing and productive dialogue with management and other shareholders focused upon maximizing the value of the company to its owners,” Lion Point Capital went on to say.

The firm added that it agrees with Hobbs’ assessment about Ally’s stock price, stating, “that there is significant value available to be unlocked at Ally that is not reflected in the current public market price, and commend the board for its stated commitment.”