On The Einhorns Of A Dilemma: Apple Inc. (AAPL), Google Inc (GOOG), Microsoft Corporation (MSFT)

Page 1 of 2

GREENLIGHT CAPITAL David EinhornFancy suing a company when it’s making money hand over fist. Such is the situation with Apple Inc. (NASDAQ:AAPL) being sued by Greenlight Capital’s David Einhorn as he tries to force the company to grab some cash from under its mattress and put it to work.  Einhorn even likened Apple Inc. (NASDAQ:AAPL)’s reluctance to part with its cash hoard to his grandmother’s “Depression mentality.” Is Einhorn an ingrate or just impatient?

In most cases investors like to see a company keeps its hands in its pockets rather than relentless expansion and dubious acquisitions. But Apple Inc. (NASDAQ:AAPL) has too much cash according to Einhorn, $137 billion, and he wants to take $50 billion of that for a perpetual preferred stock issuance yielding 4% or better. Late in the day Apple came out with a statement saying they had already been considering upping the common stock dividend. The Apple statement catalyzed a 3% share price rise just before the February 7 close and rising again on February 8 after Goldman Sachs put out a note approving the public discourse on using Apple Inc. (NASDAQ:AAPL)’s cash hoard.

Does Einhorn Have Apple “Juice”?

Activist shareholders like Einhorn, Icahn, et al. have had some success with other companies implementing their agendas, but we’re talking about Apple Inc. (NASDAQ:AAPL) here. Einhorn is urging fellow shareholders to vote against a proxy proposal that he alleges would effectively deny the Board the ability to offer such a preferred stock class in the future.

Einhorn is dissatisfied also with the $10 billion share repurchase program (with $35 billion more to go). He may have some legal basis for a suit as the Apple shareholder proxy was “bundled” with other corporate governance measures, all too similar to Capitol Hill resolutions, forcing shareholders into an all or nothing position. His legal challenge has some likelihood of winning, too. Apple issued a release categorically stating that the Proposal #2 would not deny future opportunities to issue preferred stock.  The proxy vote is scheduled for the February 27 shareholders meeting.

Einhorn is echoing the views of many of Apple’s millions of shareholders as he released, “Greenlight is dissatisfied with Apple’s capital allocation strategy. Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money. Greenlight believes that Apple’s proposal to eliminate preferred stock from its charter is an unprecedented action to curtail the Board’s options. Greenlight is not aware of any other company that has ever taken this step voluntarily.”

Einhorn holds over 1.3 million Apple shares, a little more than half what CalPERS (California Public Employees’ Retirement System) holds. CalPERS announced it would be backing Apple’s side of the proxy battle. There are several advantages to Einhorn’s side: it keeps ownership by management undiluted, keeps the $100 billion cash on foreign shores from bearing undue tax burdens when repatriated, and lastly draws value investors into the stock.

It isn’t like Apple’s cash is uninvested, almost $130 billion is marking time in corporate securities, funds, government securities, MBSs, CDs and almost every flavor of investment any granny would feel comfortable with until Apple decides what to do with it.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 9 Most Dangerous Countries for Tourists to Visit

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!