Einhorn’s ‘Silly Sideshow’ Just Got a Lot Less Silly for Apple (AAPL)

By Feb 23, 2013, 8:10 AM Author's Blog  

David Einhorn’s Greenlight Capital has won a court order to block an Apple (AAPL) shareholder vote, scheduled for the company’s Feb. 27 stockholders’ meeting, that would limit the tech giant’s ability to issue preferred stock to investors.

In his ruling issued Friday, Manhattan District Court Judge Richard Sullivan said Apple improperly bundled together several shareholder proposed amendments, including the preference-share measure, which it has said it opposes, to be put for a vote into one proposal, known as Proposal #2, at next Wednesday’s annual meeting.

“Given the language and purpose of the rules, it is plain to the court that the preferred shareholder measure  impermissibly bundles ‘separate matters’ for shareholder consideration,” Judge Sullivan wrote in his decision, adding that shareholders should get to vote on the amendments separately.

Apple responded in a statement, saying: “We are disappointed with the court’s ruling. Proposal #2 is part of our efforts to further enhance corporate governance and serve our shareholders’ best interests. Unfortunately, due to today’s decision, shareholders will not be able to vote on Proposal #2 at our annual meeting next week.”

“This is a significant win for all Apple shareholders and for good corporate governance,” read a statement from Greenlight Capital. “We are pleased the court has recognized that Apple’s proxy is not compliant with the S.E.C.’s rules.”

Einhorn’s lawsuit is part of a broader effort to get the iPhone-maker to return some of its $137 billion cash hoard to shareholders in the form of preferred stock. Dissatisfied with Apple’s capital allocation strategy, Einhorn wants Apple to issue “iPrefs,” preferred shares with a perpetual 4% dividend, as a way of committing the tech giant to sharing some of its enormous amount of cash that sits idle on its balance sheet with shareholders. Einhorn, who has publicly accused Apple for having a depression-era mentality, said earlier this month that the company’s cash hoarding, which exceeds the market cap of all but 17 companies in the S&P 500, was like “someone who’s gone through traumas…they sometimes feel they can never have cash.”

The court’s ruling is certainly a blow to Apple’s pride, and particularly to its Chief Executive Tim Cook who last week dismissed Einhorn’s efforts to block proposal #2 as a ‘silly sideshow’.

A shareholder since 2010, Einhorn’s Greenlight Capital owns 1.3 million shares of Apple.

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3 Comments

  1. mds says:

    So the sideshow is over; silly or not; and the shareholders will vote.
    Einhorn does not own enough AAPL for his vote to count. It will be what the collective shareholders want.
    Regardless Einhorn will continue his comments and continue to buy and sell shares on these $10 a day swings at the every day investor’s expense; who also paid the legal bill for this decision, which might not net anything except to further bloat Einhorns ego.

  2. Ri waterman says:

    I can agree that Apple should have separated these issues in its stockholder propositions but this court ‘victory’ really did nothing. So apple separates these items, a vote is delayed. So what?

    It still Was a silly sideshow.

    The real question still remains what portion of Apple cash will be returned to benefit shareholders thru dividends, buy backs or future company investments.

  3. AdamC says:

    Still silly and a silly report.

    Dude it is only the bundling that was not right and don’t tell me the rights of shareholders regarding the blind issue of preferred shares without their approval is right?

    Go figure.

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