Greenlight Capital has decided to file a case against Apple in an effort to release stockpiling cash of $137bn to shareholders, while restricting the iPhone maker from issuing a new high-yielding class of shares.
David Einhorn, founder of president Greenlight Capital, wrote a letter to Apple shareholders urging them to vote against the company’s corporate charter changes.
Apple, in a statement, said: “Apple’s management team and board of directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock.”
Apple added that shareholders would still have the right to approve the issuance of preferred stock under its proposed changes, which it said had “the support of many of our shareholders”.
Einhorn wrote: “We understand that many of our fellow shareholders share our frustration with Apple’s capital allocation policies. Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money.”
Einhorn added that proposed changes to Apple’s corporate charter do not comply with Securities and Exchange Commission voting rules and “unnecessarily limits the board’s flexibility to distribute preferred stock as a means of unlocking shareholder value”.
Einhorn argued that releasing stockpiling cash would be a simple, low-risk way to reward shareholders without compromising the financial and strategic flexibility of the company. However, Apple rejected this idea in September 2012, according to Greenlight.
Anne Simpson, head of corporate governance at Calpers, said that the fund still support removing the board’s ability to issue blank cheque preferred stock, as investors could still approve Einhorn’s plan separately. “It’s quite right that the shareholders should make decisions which affect the capital structure.”
“We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value,” Apple added.
In his letter Einhorn further said that every $50bn of perpetual preferred stock issued by Apple would unlock about $30bn, or $32 a share, in value.
“Greenlight believes that Apple has the capacity to ultimately distribute several hundred billion dollars of preferred, which would unlock hundreds of dollars of value per share,” Einhorn said.
Greenlight Capital holds a 0.12 per cent stake in Apple.