Greenlight’s Einhorn outlines his plan for Apple to return more cash to shareholders

“Greenlight Capital Inc. founder David Einhorn on Thursday began to detail his plan for Apple Inc. to return more cash to shareholders, in an attempt to rally other shareholders to support his plan for the company to issue a new type of preferred stock,” Jessica E. Lessin reports for The Wall Street Journal.

“The remarks, made in an unusual public conference call, attempted to paint a plan he has been pushing for weeks as reasonable,” Lessin reports. “‘It is not complicated. It is merely unfamiliar,’ Mr. Einhorn said in introductory remarks.”

Lessin reports, “He says that companies that fail to distribute cash to shareholders are punished by shareholders, mentioning Dell Inc. as a cautionary tale.”

Read more in the full article here.

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21 Comments

  1. If Einhorn wants Apple to issue preferred AAPL stock to everyone with a virtually guaranteed high dividend, then why issue preferred at all? Just get the stockholders to force a stockholder vote that Apple will distribute as a dividend 20% of the accumulated Apple cash every year. There is no need for “preferred” status.

    The reason for his push? It’s because he knows that very large individual investors (there are a few) and some of the non hedge fund organizations that have large holdings won’t support his plan. Thus he makes a big show in hopes of embarrassing Apple into doing something like this specific version of preferred stock issued to a subset — like his fund. This would make him look like a hero to his investors. It would advance his fund and make him richer. It would do ABSOLUTELY NOTHING to benefit Apple, Inc.

    Apple, Inc. does not *NEED* a higher stock valuation (capitalization) to do business better than it does now. Increasing capitalization allows you to *borrow* money at more favorable terms and get better deals on various financial instruments around the world. It does nothing else other than give you bragging rights. As the public company with the highest capitalization — bar none — Apple, Inc. does not need this. As a company with virtually zero debt (every company has short term debt no matter how cash flush the company is), Apple does not need this.

    Apple, Inc. needs to *USE* the cash to make Apple, Inc. better. Apple, Inc. has absolutely no need to make Einhorn’s fund better or Einhorn richer.

    And…
    Attempting to compare Apple to Dell is 100% asinine. Dell had a completely different business model (called, “the race to the bottom”) that any sane investor knew was not sustainable. No one wins — long term — by having their primary selling point being that they can do something cheaper than the next guy. That’s not innovation (like the iMac). That’s not growing into, or creating, new markets (like the iPod, iPhone and iPad). That’s not creating jobs (like the new plant in the U.S. and data centers in the U.S.). Dell didn’t even have a “new business model” for doing things better (which is what they claimed for years). They just had a drive to get barely tolerable quality WinTel machines out as cheaply as possible. Doing things as cheaply as possible and selling the product as cheaply as possible is NOT a new business model.

    Dell was doomed to long term failure. That’s why I told each of my money managers (across multiple firms) over a decade ago that if they put a penny of my money into Dell, I’d drop them in a heartbeat.

    Apple does do things differently — not always right, but definitely differently. I hope it continues to do so.

    1. Listen to the presentation, so you can argue from facts rather than speculation. LIke it or not Einhorn’s plan take account of the large pool of cash sitting overseas (no need to repatriate it a high tax rates), the cash at home (keep it available for company use at will), and U.S. tax law (dividend are taxed at the low rate). He went over the other possibilities, including yours of a raising the ordinary dividend and found them wanting.

  2. Einhorn is ONLY INTERESTED in putting money IN HIS POCKET. HE DOES NOT CARE ONE IOTA about the rest of us as stockholders. He is a HEDGE FUND MANAGER – NOT A STOCKHOLDER – A MANIPULATOR.

    As STOCKHOLDERS, WE WANT EINHORN as a leech to GO AWAY. WE SHOULD BE GETTING EXTRA DIVIDENDS FROM EINHORN !!!

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