David Einhorn wants Apple to “think different” … about its cash. The hedge fund manager’s Greenlight Capital sued Apple Inc on Thursday, saying the company should give stockholders a bigger share of its huge cash pile.
Apple shares, which had fallen 35 percent from mid-September through Wednesday, were up 0.9 percent at $458.70 in morning trading.
Einhorn, a well-known short seller, is long on Apple shares. In a television interview on Thursday, he said that while he admires the company, it has a “cash problem” that it needs to fix by giving away perpetual preferred stock with a 4 percent yield.
“The idea is powerful, and when I have a chance to explain it to the shareholders, most will see it as an enormous win-win,” Einhorn told Reuters.
Apple was not immediately available for comment.
One analyst said there were merits to Einhorn’s proposal.
“He’s a huge holder in the stock, the shares are down and it’s natural for a person like that to try and reverse that,” said BGC Partners analyst Colin Gillis. “Other shareholders may join, but whether it will change the tide remains to be seen.”
Analysts have said stockholder pressure would increase as Apple’s share price and clout declines, and investors have persistently called on the company to be more proactive in using its massive cash and capital hoard.
As recently as last month, Chief Financial Officer Peter Oppenheimer told analysts on a post-results conference call that the company, which has the largest cash balance in the tech industry at more than $100 billion, was considering various ways to be more active on that front.
Money managers have also said that Apple’s cash pile was underperforming the results peers had been able to achieve with their own money.
‘UTTERLY MISVALUED’
Calling Apple shares “utterly misvalued” at current levels in a CNBC interview, Einhorn said the company no longer needs to grow at the near-triple digit rates of the past.
For every $50 billion in preferred stock that Apple gives away to shareholders, it could unlock $32 a share in value for investors, Einhorn said, without elaborating on how he arrived at that number.
In a statement, Greenlight said it spent part of 2012 in discussions with Apple on the idea of perpetual preferred stock, but that the company rejected it last September.
“We understand that many of our fellow shareholders share our frustration with Apple’s capital allocation policies,” Greenlight said in an open letter to other investors. “Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money.”
Greenlight also filed a lawsuit in federal court in New York on Thursday to force Apple to modify a proposal in its proxy, which the hedge fund believes does not conform to regulatory rules.
Greenlight said it is opposed to the proposal, No. 2 on Apple’s proxy, which the firm said would remove the company’s ability to issue preferred stock from its charter.
Source : Reuters
