David Einhorn sues Apple over shareholder cash, company promises action

Written on:February 8, 2013
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Apple sued by David Einhorn

Apple’s huge cash reserves earn shareholders’ wrath

Apple’s investor David Einhorn, who also happens to be the head of hedge fund Greenlight Capital, has sued the technology giant and demanded to return more of its $137bn (£87bn) cash pile to shareholders. Apple has responded to his rebellion act by saying that ”active discussions about returning additional cash to shareholders”. David Einhorn, whose Greenlight Capital hedge fund owns 1.3m Apple shares, which is 0.12% of the company, had said that Apple was having “cash problems” and it should resolve the issues by paying out more cash to the investors.

David Einhorn said that although he understood Apple’s need to maintain large cash reserves because of the “tough times” it has been through in the past, but said that Apple’s cash reserve, which is only £3.7m less than the gross domestic product of New Zealand and 23 times the market value of Marks & Spencer, has grown out of proportions.

The Apple investor opined that the company should reduce its cash by giving away perpetual preferred stock with a 4% yield. Preferred stock are a hybrid of debt and equity that pay a regular dividend but have no voting rights. David Einhorn said that he had pursued Apple with his idea for several months, but the company rejected it.

Apple took notice of David Einhorn’s plan only after he slapped a legal notice on the company against proposed changes to Apple’s charter, which Einhorn said “unnecessarily limit the board’s flexibility to distribute preferred stock as a means of unlocking shareholder value”. Apple’s chief executive Tim Cook first issued a dividend, both as company leader and for the first time in the company’s history, in August 2012. Tim Cook had been a talking point when he decided to take a pay cut with no stock awards last year.

David Einhorn even wrote an open letter to other Apple’s shareholders, many of whom called on the company to return shareholders’ cash. In its defence, Apple has come out to say that it would continue to “evaluate” proposals that would see investors issued some form of preferred stock. Apple has more than $100 billion stashed away in the bank in various countries around the world and remains one of the largest and most profitable technology companies around.

     

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