Suman Chatterjee writes for Seeking Alpha, “Last week, David Einhorn, the hedge fund manager of Greenlight Capital that owns between 1.3 million and 1.5 million shares of Apple, initiated a ‘Proposal 2 awareness’ campaign against Apple. His only concern with the company ‘he apparently loves so much’ is as follows (source: Apple website): ‘However, like many other shareholders, Greenlight is dissatisfied with Apple’s capital allocation strategy. The combination of Apple’s low (and shrinking) price to earnings multiple and $137 billion (and growing) hoard of cash on the balance sheet supports Greenlight’s contention that Apple has an obligation to examine all options to create and unlock additional value.'”
“As evident in the message above, he is concerned about shrinking capital gains margin with holding an Apple stock,” Chatterjee writes. “As a potential solution to that, he advised Apple to distribute “free” preferred stocks to the existing common equity shareholders at a predetermined dividend rate. Not to forget the fact that these preferred stocks will have the provision to be traded just like a common stock.”
Chatterjee writes, “While Einhorn wants to get more money for the Apple shareholders, it looks more as if the hedge fund magnate is trying to compensate for lackluster fund return of Greenlight Capital. Is he looking for compensation for the fall in share price and, thus, lower fund return? Activist investing might be good for the fund managers but for the investors who truly believe in the company, Einhorn’s advice should be taken with a pinch of salt.”
Read more in the full article here.
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