is a very low-cost way, in other w ords, I don’t believe there’s a lot of benefit for improving on its own and I don’t that there is a great deal of harm our project thing it on its own, to send a clear message to Apple’s board that this is a direction that you would like him to pursue. Can we have the next question?
Unknown Speaker*
Richard Todaro Kennedy capital.
Unknown Speaker*
An interesting concept and very creative, but wouldn’t it be simpler just to say, okay, enough is enough the cash is built up to a point that it doesn’t need to go any higher and going forward the company should just redeploy all their free cash flow into a buyback of dividend?
Unknown Speaker*
While you’re at it, why not mentioned to them about licensing out there operating system so they don’t have to make low-margin devices but can still penetrate that market so Microsoft and Google and everybody else has done it. Those are my thoughts.
Unknown Speaker*
I appreciate them. I’m going to leave aside the issue relating to the operating system. That’s just not the topic for today to get into. Relating to the other, I think we laid it out as clearly as we could work for every dollar that the company spends on increasing the common dividend, shareholders would receive a much much greater bang for the buck in terms of value unlocking per dollar distributed if they went in the direction of I’ve preps. That’s why we laid out this whole PowerPoint presentation and I think that the comparisons are r elatively — relatively clear.
It’s not that we are opposed to those other things, it that we think it’s by far the best way to get the most value for the common shareholders while, for whatever amount of capital that Apple is willing to distribute, if they’re willing to distribute more, they can issue even more iPrefs and we could actually make spreadsheets and build things that would show even much greater value unlocking than what we are talking about today. Go to the next Western.
Unknown Speaker*
HP saying KF capital management.
Unknown Speaker*
Thanks for the presentation. It seems to me that clarify, you been talking at the tea stall down the road from a father was holding up seven beautiful girls that we’d like to date. What is your expectation of Apple listening to these proposals, taking them seriously and giving them the time that’s deserved and actually coming up with the response publicly either to yourself, then to the shareholders or to the marketplace? Figure.
Unknown Speaker*
I think Apple has publicly and privately committed to giving a serious evaluation to this p roposal. I think that they will do so. I believe that we will all get a response to it here I think the most important thing that shareholders are interested in doing and to do right now is to vote against opposable number two so that they understand that this is something that there is a popular dissatisfaction with the current capital management program. I have no reason to believe or to disbelieve, I’m sorry, I have no reason to doubt Tim Cook at his word when he says he’s going to evaluate this seriously and I expect you will do so.
Unknown Speaker*
Ashwin with A.D. Capital Partners.
Unknown Speaker*
I was wondering the, would you have preferred that Apple never started the dividend on the common and what do expect iPrefs will pray with respect to a discount a premium to traditional professional preferred like historically the financials in the ’80s and 90s. Thank you.
Unknown Speaker*
Okay. Relating to the common dividend, I think the same is true there. You could actually build a case where you distributed even more iPrefs unsubstituted out the dividend. You get a higher value on lock on that basis. We thought a year ago, when they instituted the dividend, that that was an inferior choice to be getting and iPref type of program. We would’ve liked to have seen it. We think that the more they do t his, if they do do this, a more they will like about Borchert you holders were like the, the more value could be unlocked. This could become a very virtuous cycle. I think it’s very hard to compare it to other perpetual preferreds. Most perpetual preferreds are financial institutions, which have highly levered Alan streets.
We’ve had experience where creditors of financial institutions have been protect the but prefer shareholders have not in. I just don’t believe this would have that kind of risk the market would assess, ultimately, what the spread would be. I think 4% seems about right in today’s market, given interest rates and given what I perceive Apple’s credit to be. I could be wrong about that. That could be a little bit different. I don’t believe that it’s likely that we are very materially wrong, particularly once the shares are distributed on the market starts trading and buyers have an opportunity to participate there that’s have the next question.
Unknown Speaker*
Marie.
Unknown Speaker*
And T crest.
Unknown Speaker*
David, thank you for your great presentation. Simple question. It was just touched upon, and that’s these will be securities traded in the market. On a yield basis, what happens when interest rates start going up and the spread between the bond — governments and — is shortened. What happens to that? Are they free to raise the two dollar dividend to keep the yield?
Unknown Speaker*
This is very simple. It’s– it’s a perpetual. The yield is fixed. The idea is that if rates fall, then the value would go up. If rates go up, and the value would go down. That’s the build of risk and opportunity that people in the fixed income market take right now, I think is a shortage of safe yield of long duration. I think insurance companies are desperate for this kind of yield.
I think pension funds are desperate for this kind of yield. Frankly, I think as many savers that are very interested in this kind of yield compared to what they’re getting at admittedly other shorter duration instruments or even compared to treasuries.
I think an issue of this size will eventually become the benchmark, long-duration, interest rate vehicle for savers, investors, traders and so forth. I think it would be highly liquid and could you fully trade at a premium to what comparable instruments might trade for. I take one last question.
Unknown Speaker*
All right. I’m told we are actually out of time. I want to thank everybody for joining us today. I encourage you to share your voice with Apple, based upon whether you agree with us, whether you disagree with us. Boat and the election and vote against opposable to to send them a clear message as to what to do. Thanks everybody so much and have a great afternoon.
Unknown Speaker*
Ladies and gentlemen and thank you for your participation in today’s conference. This concludes the presentation and you may now disconnect. Have a good day.
