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

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

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.