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.