Judge sides with Einhorn, halts Apple shareholder vote on Proposal No. 2

“A federal judge on Friday ordered Apple to halt collecting shareholder votes on a contentious proposal to change some of its corporate charter, handing a victory to the hedge fund manager David Einhorn,” Michael J. de la Merced reports for The New York Times.

“The ruling issued Friday touches on a fairly narrow legal point,” de la Merced reports. “But it signals a clear win by Mr. Einhorn, who has taken up a fight with Apple over using some of its $137 billion cash hoard to make additional payouts to shareholders… ‘Given the language and purpose of the rules, it is plain to the court that Proposal No. 2 impermissibly bundles ‘separate matters’ for shareholder consideration,. Judge Sullivan wrote in his order. His ruling orders Apple to stop accepting shareholder votes on Proposal No. 2, and comes just days before the company’s shareholder meeting next Wednesday.”

de la Merced reports, “The company will now likely have to break up Proposal No. 2 into its separate elements and resubmit them to a vote. The timing of that move isn’t clear.”

Read more in the full article here.

Related articles:
Einhorn says Apple ‘iPref’ stock would unlock pent up value – February 21, 2013
Greenlight’s Einhorn outlines his plan for Apple to return more cash to shareholders – February 21, 2013
Einhorn’s Greenlight Capital: Every Apple shareholder should get preferred shares ‘for free’ – February 21, 2013
Hedge fund manager Einhorn takes Apple campaign to shareholders via conference call – February 21, 2013
Einhorn’s lawsuit against Apple hangs on ‘irreparable harm’ – February 20, 2013
Greenlight makes case to stop Apple preferred-stock vote – February 19, 2013
Apple accused by Greenlight of breaking law by bundling – February 16, 2013
Judge approves Apple request to expedite Einhorn’s Greenlight Capital case – February 11, 2013
Apple’s cash return options: Pay U.S. tax man or incur massive debt – February 11, 2013
Bernstein’s Sacconaghi: Most important for Apple is a capital allocation plan – February 11, 2013
Evaluating David Einhorn’s proposal to Apple – February 9, 2013
The colossal gall of bad Apple investors – February 8, 2013
Cramer: By suing Apple, wrong-headed Einhorn has gone too far – February 8, 2013
Analysts: Apple may crack open its massive, bulging wallet for shareholders – February 8, 2013
Apple with $137 billion in cash considers preferred stock – February 8, 2013
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
Legg Mason’s Miller: Apple stock would rise 50% on ‘sensible capital allocation’ alone – February 6, 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

28 Comments

    1. @Shadow – “and all this is for naught.”

      Nope … all of this is for a big dividend increase.  Einhorn doesn’t fight these battles over nothing.  After Apple (Oppenheimer) blew him off a few months back regarding ways to distribute its excess cash, Einhorn used the only means at his disposal to move Apple’s capital allocation strategy from the back burner to the front.

      1. His Shadow is absolutely correct – all of this is for naught. Breaking up Proposal #2 won’t change anything. Even if the section of Proposal #2 dealing with amendments to the preferred stock rules is deferred or defeated, it won’t change anything. The current rule is that the Board can issue preferred shares. The new rule would require a majority shareholder vote. Either way, you are not going to see any preferred shares issued in the foreseeable future.

        Einhorn achieved a token win that will have no impact on future events. The thing that bothers me is that Apple legal dropped the ball and enabled Einhorn to embarrass Apple by winning this lawsuit.

  1. Important issues should never be bundled. That’s pretty obvious. If it’s not a good thing, the shareholders won’t vote for it. Every vote counts. Your vote is as important as the next guy. It’s never wrong to let the people vote.

  2. I HATE (I can’t say that strongly enough) lawsuits. Every single one in which I have been involved I have hated. (You haven’t lived until you’ve been grilled on the stand for over four days straight!)

    However…
    If I had the free cash, which I don’t, I’d sue Einhorn in a heartbeat. I’d find every possible accusation I could throw at him and grind him personally into dust.

    Then, just to show I’m not just after Einhorn, I’d start a campaign to unseat this judge. The SEC had already made a ruling on the appropriateness of this bundling of topics. The SEC applied the SEC’s rules and regulations and said it was OK. This judge now says it’s not.

    At the very least I hope Apple appeals. Given the totally screwed up legal system in the U.S. I doubt it will do any good, but they should appeal on principle. They should also get the SEC to file a brief with the appeals court as to why they thought the bundling of topics was OK.

    In the annals of all the idiots we’ve talked about in these threads, I’m now voting Einhorn and this judge, Richard Sullivan, as the top two idiots, bar none.

    1. I have been posting all week on my distain for Einhorn and his ilk. I feel at least as as angry as you do as this has nothing at all to do with Apple bundling issues for stockholder voting. It has to do with a weasel grandstanding and trying to screw up one of the best companies ever so he and his amoral ilk can make a short term monetary gain. I find absolutely no redeeming value in someone like that.

      1. 2/23/13
        I just sent this email to Tim Cook:
        Can you still appeal the Injunction decision by US District Judge Richard Sullivan on the same grounds from which Einhorn won?

        We APPL shareholders who already voted FOR Proposal #2 are being denied our right to vote.
        Essentially, the injunction now denies our YES votes (which would have likely constituted a majority of APPL shareholder votes) —
        on behalf of a minority of NO votes. Can’t the votes be counted and case be made in time to stop this? or even after the fact?

        You must do something to stand up strongly for your loyal stockholders in the face of predatory hedge-fund manipulation, profiteering
        and Wall Street hype — which threaten bona fide stockholders and the stock price itself. Please do this now and publicly.
        The whole world is watching.

        Thank you,

    2. Sounds to me like you’d be an asset to a joint effort lawsuit against Einhorn. Apparently there are many shareholders that feel like you do and feel he is hurting their interests, doing irreparable harm to their investments or economic advantage and all the other valid accusations.

      Any suggestions on how to unite, pool and initiate a lawsuit against Einhorn?

      1. 2/23/2013
        I just sent this email to Tim Cook:
        From: dancingUSA@optonline.net
        Subject:AppealEinhornInjunctionDecision?:MajorityProp2YesVotersDeniedRightsToo!
        Date: February 23, 2013 11:10:41 AM EST
        To: tcook@apple.com
        Can you still appeal the Injunction decision by US District Judge Richard Sullivan on the same grounds from which Einhorn won?

        We APPL shareholders who already voted FOR Proposal #2 are being denied our right to vote.
        Essentially, the injunction now denies our YES votes (which would have likely constituted a majority of APPL shareholder votes) —
        on behalf of a minority of NO votes. Can’t the votes be counted and case be made in time to stop this? or even after the fact?

        You must do something to stand up strongly for your loyal stockholders in the face of predatory hedge-fund manipulation, profiteering
        and Wall Street hype — which threaten bona fide stockholders and the stock price itself. Please do this now and publicly.
        The whole world is watching.

        Thank you,

  3. Ok – the ONLY thing this guy is guilty of is stopping what has halted congress for decades..

    Vote on 1 thing at a time.. Don’t put a golden egg into another basket and call it something different..

    He’s calling apple on it.. Maybe it would have been voted down..??? Who knows..

    It’s a – sorry to say – victory for us shareholders..

    Now – what apple should do with their cash is entirely another thing..

    Only they no best.. How many satellites can you put into orbit for 100 billion?

    Neither does knobhorn… Stop while he’s ahead

    1. @thomas
      I don’t understand how you call this a “golden egg” when it was a FAVORABLE thing for shareholders.
      Don’t you think ALL shareholders should have the right to vote on whether a company issues any kind of preferred shares? That’s what prop 2 is!!!!
      Einhorn has stated that a general shareholder vote on that issue would be a “roadblock” to the shares he wants for himself and thus is against it, and for the life of me I can’t understand why anyone would agree with him.
      It’s all a scam and this is NOT A WIN for shareholders!

    1. The issue really comes down to the concept of whether the bundling of topics either a) violated SEC rules [the SEC says it didn’t] or b) causes irreparable harm to stockholders. The judge’s ruling does not hold up on either count.

      Issues are often bundled when they come up for stockholder’s vote. It’s not unusual. If every issue had to be a separate vote then the list of motions would be much longer for most companies. While it may seem to you that Apple is trying to sneak something through, it’s very unlikely that is reality. Besides, requiring stockholder approval to issue preferred stock is something very likely to pass anyway. Who other than someone like Einhorn would vote against it? Seriously, who?

      The issue Einhorn does not like is that if the current motion, as it’s written, gets passed then the board, without stockholder approval, can’t issue his pet idea of a specific kind of preferred stock. He knows he’ll never get stockholder approval for his idea. His only hope is to get the board to do it. That’s why he does not want the rule changed.

      It’s all just a ploy to delay things so he can try to work the system behind the scenes. He hopes that if he can rattle enough cages in the future he can drive Apple’s stock low enough to get the board to go with his plan — or something close to it.

      The worst thing that could happen, if the vote went forward as it is written now is that he — and anyone else he can convince — would have to push forth a motion for vote that would reinstate the board’s ability to issue preferred shares. OR He and his ilk could put forth a motion directly to the stockholders for preferred shares to be issued. If he can convince the majority of stockholders to vote for an issuance of preferred shares then at most he’s delayed until that vote happens.

      Does not sound like irreparable harm to me. Sounds to me like Einhorn — at worst — would not be able to make money as fast as he would like.

      My hope is that Apple appeals this and wins. Barring that, I hope Apple unbundles the issues and then everyone votes for all three. Thus the outcome would be the same.

      Barring all that, I hope Cook and the rest of Apple’s board tell Einhorn to just buzz off (to put it somewhat politely).

      1. …and again…

        Absolutely right that if Apple puts this issue alone to shareholders it will overwhelmingly pass as per the board’s intention. Einhorn is just a corporate vulture and raider, he is a greedy little asshole and will try to disrupt and destroy Apple in the process of trying to pry away it’s cash. The only thing that he will understand is a lawsuit that would knock him out, it’s the only thing worries about… His money and his ‘self assured’ “power”.

        Apple should and hopefully will, shut him up in more ways than one and all shareholders that feel he is hurting their interests, doing irreparable harm to their investments or economic advantage, should unite and together pool a supplementary one.

  4. Apple should IMMEDIATELY (if not sooner) call a Special Shareholder Meeting as soon as legally can be done to vote on an unbundled prop 2.
    It will all pass overwhelmingly.
    That will shut Einhorn up once and for all.
    End of story.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.