Greenlight’s Einhorn sues Apple over plan to eliminate preferred stock, wants more cash distributed

“An activist investor wants Apple Inc. to distribute more of its ballooning cash hoard to shareholders,” Barbara Ortutay reports for The Associated Press.

“Greenlight Capital said Thursday that it is suing Apple in a New York federal court over the company’s proposal to eliminate preferred stock,” Ortutay reports. “David Einhorn, who heads Greenlight, said the proposal would prevent Apple’s board from unlocking shareholder value.”

Ortutay reports, “Apple, the world’s most valuable company, is drawing increasing criticism from investors who are pushing the company to do more with its enormous pile of cash – $137 billion and growing. Einhorn told CNBC on Thursday that Apple has a Depression-era mentality. He compared Apple to his grandmother ‘Roz,’ who grew up during the Great Depression. She was so careful about saving money, Einhorn said, that she never left messages on his answering machine out of concern that she’d be charged for the call. People who’ve experienced trauma, he said “sometimes feel like they can never have enough cash.””

Read more in the full article here.

Related articles:
Greenlight Capital urges Apple shareholders to vote ‘No’ on proposal 2 that would impede Apple’s ability to unlock shareholder value – February 7, 2013
Greenlight’s Einhorn sues Apple, ‘dissatisfied with capital allocation strategy’ – February 7, 2013
Greenlight’s Einhorn: Apple ‘the best big growth company’; Fed stimulus ‘counterproductive’ – July 10, 2012
David Einhorn says Apple isn’t a below-average company, it’s just priced like one – May 30, 2012

23 Comments

  1. Does he legally have a leg to stand on? Can an investor really tell Apple the company what it should do with it’s money? If I have stock, can I tell Apple give me your money, just because?
    Seems like a very big stretch that he can legally win anything from this other than publicity.

  2. Over the years, AAPL (the stock) had several periods when stock took a fall from recent highs. If we look at the period of resurrection (since the return of Jobs), there was the dot-com crash, which took AAPL down big time; then again in 2002, and again in 2006/7, then 2008/9, and then 2012/3. In every one of these situations, quarterly earnings and profits were actually extremely good, in most cases breaking records for the company.

    Shareholder value cannot and should not be determined based on a six-month decline, when all other underlying data points in the other direction. AAPL is not MSFT, and it definitely isn’t RIMM.

    I don’t think this guy has any legal argument to win this. How can he possibly prove that the current Apple policy regarding shareholders is actually detrimental?

    Where I may agree with him is that the cash should be used, rather than hoarded. But definitely NOT to give it to the shareholders. Buy up smart companies, keep throwing money into innovation, spend on product, service, support, and all will be great. People will continue to buy up Apple products and services, revenue and profit will continue to break records and stock will eventually turn around and hit another all-time high.

    But don’t waste money on short-time shareholder gratification, please!

    1. Where you agree with him is the crux of the argument. He simply wants the money put to good use. “Giving the money back to the shareholders for short-term gratification” as you call it is not all that he suggests. He simply wants something positive done with some of the money. I know because I watched the interview. And you’re wrong. This is not something that has just come up lately because the stock is down. This is been raging for a long, long time with shareholders and people in the industry. This has nothing to do with the recent plummeting of share price. I repeat, nothing. The recent precipitous drop in share value simply accentuates this point. His point is to use it rather than to let it just sit there. But that seems pretty obvious to anyone with any common sense.

      1. Who the fuck is he to tell Apple how to run the goose that lays the golden eggs?!

        He can sell his holdings and invest them in any company he likes and supports, many longtime private shareholders and some institutionals invest in a company that we trust and know differently.

        1. Breeze : It’s difficult to decipher your comments as written. All shareholders have a say in the company. Everyone has a right to express their opinion as a shareholder. He is expressing his opinion and the opinion of millions of shareholders. Try to understand the situation before you comment. I doubt that you are even an investor. And don’t defend Apple like it’s your sister. That’s just simply silly.

          1. You are a moron in the fist degree ‘Johnny come lately’ , just because you need to be spoonfed everything opine on from the late date you appeared here on this Apple forum and because you have some recent investment don’t mean you have any say but your dollars that hope to grow by investing… It doesn’t give you any qualification whatsoever to second guees your drivel or your investment company. Don’t like it? Lump it and get the hell out.
            Just for your little ego: I have had a professional affiliation with Apple as a consultant, developer, systems integrator and investor and have made a pretty good living from it. Eat some humble pie turkey and stfu.

            1. Late date? Did I miss check in? And goodness Breeze,you’re the one who used the nasty word fuck. You’re the one who had the belligerent comments towards me. Recent investment? I’ve been investing in AAPL for decades. I make a living with Mac Pros. Have been doing it forever in good old SoCal. If you’d like to visit one of the studios I can get you a walk on pass. Oh wait that’s right, you’re a big time professional yourself. Anytime you’d like to compare notes just let me know. There’s nothing like flushing out a liar.

            2. Fuck is a nasty word?! You should try it, maybe getting fucked would get you off tooting your own horn since you got here, maybe even get your rocks off, so you’ll start tooting your horn there too, loser.

      2. GM,

        This is not, “He simply wants something positive done with some of the money.” He wants Apple to create a new class of preferred stock and convert the institutional investor’s stock to that preferred stock class. The new class would have accelerated dividend distributions. If you read all the investigations into this you get more details of what he wants than the simple, “I want Apple to do what’s best with that cash.” If Apple poured $50 Billion into overseas manufacturing and distribution systems so that they never had any fiascoes like Apple is having now with the iMacs, he’d still scream and sue Apple for not distributing the wealth to the preferred shareholders: HIM.

        How is this NOT about the share price (though it seems he invested long after most of us and watched 90% of his profits evaporate over the last few months). To recoup that paper loss he wants Apple to give him money — aka, dividends at a preferred rate.

        He just wants his money now without regard to the long term health of the company. He can put any kind of spin on it he wants. It still just comes down to short term greed on his part.

  3. If they’d just develop a personal medical assistant that is part wrist sensor and part software they’d rule the world. No one is getting any younger.

    The world would eat that up.

  4. Hedge funds want to take control of Apple in more ways than one with hostile moves to win votes, litigation, instigation, FUD, short and distort tactics and the likes…

    They will never succeed and Apple would be wise to pre empt them (with some smart moves that pry away holdings from institutional ivestors and hedge funds with a hostile intent) from their destructive power derived from holding such big positions. Get ’em Tim!

  5. Einhorn what’s AAPL to be the the Government and send and give away all of it’s cash so it has to take out loans to do things. He’s just sore that the cash is not his, it’s Apple’s and he wants it. There are companies that are smaller that have almost as much cash as Apple does. Why should we stock holder want Apple to carve up it’s cash advantage club to give us tooth picks. The short sightness of some money grubbers is well beyond me.

  6. Okay, many of you commenting here are clueless and the article headline itself is misleading and inaccurate at BEST. Quit your whining for a second and do just a little activity to inform yourself about what was said and the actions taken.

    Einhorn is very bullish on Apple. He is not suing the company to get it to distribute more cash. Einhorn is following proper channels by filing a legal challenge in court to have Apple breakup item 2 on the proxy into desperate items as he believes is required by SEC regs.

    1 if those items relating to preferred stock is something he feels would be worth considering on its own merit as a way to unlock some of the value in the large cash position of Apple without needing to use the cash, nor repatriate the cash and also in a way that allows Apple to keep as much cash it sees fit for their strategic objective going forward. He simply is asking that that option not be taken off the table.

    He is not telling Apple what do with its cash but he spoke with Apple and Tim Cook personally about ways in which Apple may more effectively unlock value without depleting its cash.

    It is worth consideration even if they reject it. Einhorn is a bright guy who “gets” Apple and has an interest in seeing them succeed. He was simply proposing a very different approach to rewarding shareholders without giving away the cash.

    Now stop being whiny bitches about stuff you do not understand.

    And MDN start fact checking your headlines.

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