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

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

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!