Apple 'Einhorned' As Greenlight Sues

Feb 7 2013 | 12:58pm ET

David Einhorn isn't shy about calling a company out—even, apparently, when that company is one of his favorites and a major part of his portfolio.

Greenlight today sued Apple Inc. in an attempt to block the company's plan to do away with preferred shares. The proposal, one of three on Apple's proxy this year—Einhorn backs the other two—would render null Einhorn's bid to get it to issue such shares to investors.

"This is an unprecedented action to curtail the company's options," Einhorn wrote. "We are not aware of any other company that has ever voluntarily taken this step."

Greenlight's now $590 million stake in Apple has both buoyed its returns in recent years, as Apple's shares climbed to dizzying heights, and blunted them in recent months, which have seen the company's stock price drop by 35%. Einhorn still thinks Apple is "a phenomenal company filled with talented people creating iconic products that consumers around the world love," but he wants the company to deploy some of its huge $137 billion cash reserve to boost its stock price.

In particular, Einhorn has called upon Apple to issue a perpetual preferred stock to shareholders that would pay a 4% annual dividend. The company has rejected that demand.

Einhorn wrote in a letter to investors that the company was scarred by its near-collapse in 1997 like his grandmother was scarred by the Great Depression. The experience left Apple with the conviction that it can never have enough cash, Einhorn said.

But, he added, "the recent, severe underperformance of Apple's shares, which are down approximately 35% from their peak valuation, underscores the need for the company to apply the same level of creativity used to develop revolutionary technology for its consumers to unlock the value of its strong balance sheet for shareholders."

"We understand that many of our fellow shareholders share our frustration with Apple's capital allocation policies," he continued. "Apple has $145 million per share of cash on its balance sheet. As a shareholder, this is your money."

Einhorn's lawsuit doesn't challenge Apple's right to bar preferred shares; instead, the complaint targets the company's decision to bundle that proposal with two others—simple-majority voting for directors and setting a par value for common stock—that are more widely-supported, including by Einhorn.


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.