“As Apple Inc. discusses ways to disburse some of its $137.1 billion in cash to shareholders, it will have to weigh the appeal of preferred shares against the higher dividends and buybacks favored by many investors,” Peter Burrows reports for Bloomberg. “Each option has advantages. Greenlight Capital Inc.’s David Einhorn is pushing for preferred shares, saying they benefit investors. Some shareholders said they’d be satisfied with higher dividends and bigger buybacks.”
“Apple is considering Einhorn’s proposal, and the board and management are actively discussing disbursing more cash, the company said in a statement. Directors have been working with Goldman Sachs Group Inc. to determine the best course, according to a person with knowledge of the plans, who asked not to be named because the talks are private,” Burrows reports. “While many investors agree Apple should return more money, some say Chief Executive Officer Tim Cook should focus on higher dividends, share buybacks or a special dividend.”
Burrows reports, “Einhorn is recommending that Apple issue $50 billion of preferred stock, to be traded alongside common shares and funded by operating cash flow. It would have a 4 percent annual cash dividend, paid quarterly, he said in a letter to shareholders. Preferred stock can have a higher yield and be issued without diluting the value of common shares.”
Much more in the full article here.
Related articles:
Einhorn’s Apple lawsuit marks biggest investor challenge in years – February 8, 2013
Gamco’s Haverty: Apple’s cash is ‘shareholders’ cash’ (with video) – February 8, 2013
Apple shares surge following company response to Einhorn – February 7, 2013
Greenlight’s Einhorn sues Apple over plan to eliminate preferred stock, wants more cash distributed – February 7, 2013
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
Gamco’s Haverty: Apple board can be sued over excessive accumulation of cash (with video) – January 28, 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
Jess Mr. Cook. Don’t fall for the Wall Street games. Ignore the advice and focus on changing the world. Leave the money alone until a brilliant purpose for it arises. Something like buying wireless internet provided and building a world wide wifi network.
Don’t you issue stock to raise funds? $137B isn’t enough? Are they planning to purchase Rhode Island? Not that they wouldn’t manage it better, of course.
Decide what the cash reserves target is. Make sound business decisions. Ignore Wall Street analysts. Stick to your well-defined product roadmap. Don’t consider that your customers know more than you do. Maximize efficiencies in your supply chain. Seek a competitive advantage from every sector of your company. Don’t fall for hedge fund tricks. Reach that target. Buy back any stock with remaining funds.
Oh, you’re already doing that? Carry on then.
Not sure what Preferred Stock would do for Apple. I suspect that, since is is Wall Street insider generated advice, ii is almost certainly an opportunity to steal from the poor and give to the rich.
Steve would tell them where to stick their advice.
Frankly, I wouldn’t trust the Einhorn’s of the world as far as I could fire their parts from a 6″ gun. It’s simply a way to line his, and his cronies, pockets at the expense of us little guys. Shouldn’t the name “Goldman Sachs” raise hackles all over the world?
Apple, put up satellites and deliver your own content beyond the living room to iTV, iPads, iPods, Apple TV and iPhones…minus all the restrictive middlemen, licensing fees, and hoops to jump thru. A radical TV and radical delivery will eventually have content makers begging you to use their content. Kill greedy DISH, DirectTV, Charter, and Comcast…they are pure stagnation to all our lives. They are nothing but middlemen who own satellites or cable lines.
GIVE ME MY MONEY! Without my investment, Apple could never have gotten to where it is. I’m ready to storm Cupertino, show them my 5 share certificate and demand justice.
You know. I really hope Einhorn bought his fund’s Apple shares at $700, hoping it would go directly to $1000. It serves that cheesy poker player right. Hoping for a straight, he got stuck with a pair of deuces. I thought in the stock market investors take their chances. How does he deserve the right to sue?
Apple is up today. I just want it to go 700+ please, is that so wrooong? All signs point to an incredible 2013 and Android headed down the other side of the mountain to the Valley of Low Market Share. (In the U.S. anyway.)
Apple issuing preferred stock — especially of the type Mr. Einhorn wants, will cause me to consider dumping my AAPL stock. If Mr. Einhorn’s wet dream comes to fruition Common Stock holders likely will get less of a dividend in the long run while those greedy bastards would get more. Additionally, Apple will have less cash to wield when it needs to make strategic purchases.
This — if it happens– in my opinion, might be the single dumbest thing Apple has ever done — even dumber than Pippin, by a long shot.
The single highest priority for Apple’s cash pile must — absolutely must — be fixing its supply chain. If it takes $30B to semi permanently fix the supply chain (nothing is permanent in the tech world) then so be it. It would be, in my opinion, money well spent.
It just proves that Apple has no idea what to do with the money. No great innovations a like a 100Mbps satellite for anyone anywhere, even the remotest countries (and US FARMERS which still have dial-up!!), no TRUE 4G limitless mobile service for $40 like most of Europe, apparently just imaginationless greedy people at the top with the philosophy, “Thanks for the obnoxious profits! We have ours, go fend for yourself.”
Can anyone explain how issuing preferred stock would help current investors. Would apple give those stocks away to those who hold shares? Or would you have to buy into the shares to benefit.
I would be happy if apple increase the dividend. It is great to get some cash back and as I reinvest it into more aapl shares I increase my holding. 4% rate would be nice.
I understand buy backs would also help but it would have to truly increase the share price. Knowing the street they would cause the stock to drop back again. At least with a dividend the cash goes into the hands of the investor.
Einhorn’s proposal is to give away the preferred stocks to existing shareholders.