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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure 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!