Apple Inc. (NASDAQ:AAPL)’s huge cash hoard has been the topic of much debate recently. David Einhorn and his Greenlight Capital hedge fund even filed a lawsuit against Apple Inc. (NASDAQ:AAPL) because of it. The presiding judge hinted Wednesday that Einhorn might have a good case against Proposal #2, which is where the crux of the debate lies.
Today Einhorn and Greenlight Capital will host a webcast to talk about the debate and how they believe Apple Inc. (NASDAQ:AAPL) should use some of its $137 billion in cash that’s just lying around unused. Einhorn strongly believes that Apple should give some of its cash hoard back to shareholders through the issuance of perpetual preferred stock, and today he will explain why he believes it is the answer to Apple’s problem of having too much cash on hand.
Peter Lynch was one of the best growth investors of all time. As the Magellan Fund manager at Fidelity Investments between 1977 and 1990, he averaged a 29.2% annual return. Q1 2021 hedge fund letters, conferences and more The fund manager's investment strategy was straightforward. He wanted to find growth companies and sit on them Read More
The hedge fund is urging Apple Inc. (NASDAQ:AAPL)’s shareholders to vote against Proposal #2, which Einhorn believes would kunuted the company’s ability to issue preferred stock. Blocking Proposal #2 is also the focus of his lawsuit against Apple Inc. (NASDAQ:AAPL).
However the company maintains that Proposal #2 would simply allow shareholders to vote on the issuance of preferred stock. In fact, CEO Tim Cook said he hasn’t entirely dismissed the idea of issuing perpetual preferred stock to shareholders. According to Cook, the tech giant is considering that option as one of several possibilities in terms of returning some of the company’s extra cash to shareholders.
At least one investor of Greenlight Capital has expressed dismay at Einhorn’s lawsuit against Apple. Reuters reports that the Nathan Cummings Foundation opposes the hedge fund’s “decision to enjoin the 2013 annual meeting and the vote on Resolution #2,” the foundation said in a letter it wrote to Einhorn, which was obtained by Reuters.
Einhorn’s response was that the foundation had redeemed its funds and is now a former investor, although the foundation said it is still an investor through a “pooled fund.” It didn’t give any further details.
Today’s live webcast is set for 2 p.m. Eastern. ValueWalk will be blogging live during that webcast, so check back then!
Apple’s next shareholder meeting is set for Feb. 27, so today’s webcast comes just in time for shareholders to hear Einhorn’s arguments and then form a decision ahead of their vote on the proposal.
Brian White a tech analyst at Topeka Capital writes:
“We don’t believe David Einhorn is married to a perpetual preferred stock; however, we believe he feels very strongly that Apple needs to start sharing much more cash with shareholders.” White notes Apple’s growing cash hoard which he believes could hit $241 billion by F2015. Since over $94 billion of the net cash is outside of the U.S., Topeka believes that David Einhorn’s perpetual preferred stock makes sense.
Shares of Apple Inc. (NASDAQ:AAPL) fell another 2 percent on Wednesday, taking it back below $450 per share again, which is where it still stands in pre-market trading.