Apple Inc. (NASDAQ:AAPL)’s big legal loss against David Einhorn may be more of a win for Apple rather than for Einhorn himself, at least in the view of one DealBook contributor.
Einhorn filed a suit against Apple Inc. (NASDAQ:AAPL) over an item that’s up for a shareholder vote at the next meeting. The judge in the case decided that Apple had wrongfully bundled more than one item into a single proposal, so the win went to Einhorn.
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DealBook’s Steven M. Davidoff walks us through the courtroom proceedings to explain why he thinks the win was actually Apple’s rather than Einhorn’s.
In the original list of Apple Inc. (NASDAQ:AAPL)’s shareholder proposals, the company said it planned to amend its articles of incorporation with two additions it believes are friendly to shareholders.
The proposal Einhorn had a problem with was the one removing the board’s ability to issue preferred stock. Apple said that amendment would simply give shareholders the right to vote on the issuance of preferred stock, but Einhorn disagreed.
Einhorn has been pushing Apple to issue perpetual preferred stock for months because he believes it is the best way for the company to unlock value for its shareholders. The company revealed in its latest earnings report that it’s sitting on approximately $137 billion in cash right now.
When Einhorn filed his lawsuit against Apple, he said it violated regulatory rules about the bundling of shareholder proposals. The judge agreed with him, although Davidoff pointed out that many companies amend their articles of incorporation with a single shareholder vote on several changes to the company’s founding papers.
There have been few cases filed under the bundling rules regarding shareholder proposals, so there is a distinct lack of precedent when it comes to Einhorn’s case against Apple Inc. (NASDAQ:AAPL). However the typical practice among companies has been to lump all those amendments under one proposal, so Einhorn’s win could mean that companies have to change the way they make amendments to their articles in the future by unbundling each proposed amendment.
As a result, other companies are probably going to be more affected by the outcome of this case than Apple Inc. (NASDAQ:AAPL) itself. And at the end of the day, what will really happen to Apple Inc. (NASDAQ:AAPL) as a result of this case? The reality is, not much. Apple still has its enormous cash pile, and Einhorn is still battling the company with a goal of unlocking that cash pile for shareholders. Apple Inc. (NASDAQ:AAPL) could even unbundle the proposals the next time around and get the proposal passed, so the repercussions the tech giant faces are slim to nonexistent.