Apple Inc. (NASDAQ:AAPL)’s latest go-around with hedge fund manager David Einhorn sure has gotten a lot of press. Although he’s not known as an activist investor, Einhorn has certainly made heads turn with the lawsuit he filed against Apple last week.
Analysts at several firms say Einhorn’s lawsuit is actually a plus for the company’s stock. They also call it a near-term catalyst for Apple Inc. (NASDAQ:AAPL) shares, and they certainly haven’t been wrong.
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
Shares of Apple Inc. (NASDAQ:AAPL) have risen almost $40 since the fight involving Einhorn first began. He’s trying to make the tech giant come up off of that big, steaming pile of cash it reported in its latest earnings report and return some of it to investors. Einhorn is calling for Apple Inc. (NASDAQ:AAPL) to issue perpetual preferred stock with a 4 percent dividend, and he says that will return about $35 billion of its $137 billion cash pile back to investors.
At the next shareholder meeting, among the proposals for Apple Inc. (NASDAQ:AAPL) investors to consider is #2, which Apple says would give shareholders the power to approve the issuance of preferred stock. However Einhorn claims that the proposal would essentially banish preferred stock from Apple Inc. (NASDAQ:AAPL)’s future.
Bloomberg contributor William D. Cohan questions Einhorn’s motives in his debate with Apple Inc. (NASDAQ:AAPL). It’s certainly important to look at the motives of any investor who takes to the public stage about any company in a way that could affect its stock price. However you must look at the entire picture.
Reuters reported earlier this month that Einhorn has been trying to make his point about preferred stock with Apple Inc. (NASDAQ:AAPL) directly and in private. The media outlet said he had been doing that “for months.”
“We saw that the proxy came out and we saw they were planning to get rid of preferred,” Einhorn told Reuters last week. “And then we said, ‘Wait a minute, we are not going to be able to bring this up again in a good way if we allow them to do this, so we should contest it now.’”
So if you’re an investor and you believe that the company you really like and have a lot of money invested in is about to make a bad mistake, what do you do? Why not use the power of the press to raise public awareness about your concerns before it’s too late?
In Einhorn’s case it may very well be concern about Apple Inc. (NASDAQ:AAPL) as a whole rather than a financial motive.
The Wall Street Journal reports that Apple Inc. (NASDAQ:AAPL) will respond to Einhorn’s suit by tomorrow, and then Einhorn’s Greenlight Capital hedge fund will respond by Friday. Because Apple has won the right to have the case expedited, the first hearing could be held next week.