Earlier this month, Greenlight Capital’s David Einhorn ruffled some feathers when he made headlines by suggesting Apple Inc. (NASDAQ:AAPL) issue a new class of perpetual preferred shares that boast a 4% yield. As part of his overture, the hedge fund star sued the Mac maker over a proposal listed in its shareholder proxy that’s coming up for a vote at Apple’s annual shareholder meeting, which is scheduled for Feb. 27 — next Wednesday.
Appealing to those you want to overrule
At issue is that Apple Inc. (NASDAQ:AAPL) is bundling three separate issues into its Proposal 2, all of which the company maintains are beneficial to shareholders and corporate-governance advocates. One of these amendments would eliminate Apple’s ability to issue preferred stock solely at the board’s discretion. Even if Proposal 2 were passed, Apple Inc. (NASDAQ:AAPL) would still be able to issue the type of preferred stock that Einhorn is asking for, except it would need shareholder approval to do so.
That would make it seem that Einhorn is looking to bypass other fellow shareholders and have the board grant his request directly. This is why it was such an interesting move that Einhorn hosted a conference-call webcast on Thursday to appeal to said fellow shareholders (the same ones he wants to effectively overrule), which he’s now referring to as “iPrefs.”
Tim Cook specifically called the whole ordeal a “silly sideshow” that was a needless distraction and a waste of time and shareholder money.
Einhorn shoots, Einhorn scores
After Einhorn filed suit, the case had been fast-tracked since the annual meeting was just weeks away. On Friday, Reuters reported that U.S. District Judge Richard Sullivan has indeed decided to grant Einhorn a preliminary injunction that prevents Apple Inc. (NASDAQ:AAPL) from proceeding with its shareholder vote on Proposal 2. The news isn’t too surprising, since earlier in the week Sullivan had said, “Candidly, I do think the likelihood of success is in favor for Greenlight on the merits.”
Of course, all of this fuss simply relates to Apple’s bundling of these proposals into one vote, and the ultimate outcome of this suit has no direct bearing on what Apple investors actually care about — returning more cash to shareholders. Even if Einhorn totally gets his way and these matters are unbundled and voted on separately, the ultimate decision of whether Apple Inc. (NASDAQ:AAPL) gives more back still lies entirely with Apple’s board and management.