Hedge fund manager David Einhorn sues Apple over $137B cash hoard - Page 2

first of all, it's not just cash. It's investments. 1. dividends and buybacks. If you are too skittish, sell or have apple buy your stock. 2. They make strategic acquisitions. They aren't going to drop 12.5 billion on a has-been mobile company. 3. Um, investors don't need to know the details until AFTER the transactions are completed. Yeah, I can see Apple say we are looking to acquire x company. google or MS could steal that company out from under Apple. All the investors should know the product cycle right now. As for new products, why announce if it isn't shipping or ready?

But they *are* doing something with it. You're just arguing from a position of ignorance because you see the word cash and just seem to assume it's in a savings account somewhere. That "cash" is largely in the form of a variety of investments, short and long term.

Einhorn probably knows this but is lying about it.

Last I heard, dividends are taxed differently from capital gains, and paying out dividends deflates the stock's value by said amount, so the value of paying them seems negative.

This business about preferred vs. common stock seems to me he has some scheme in mind, hopefully shareholders carefully weigh his proposals with that in mind.

Suing the company you own a part of is pretty stupid too, either way, you lose. You're paying your legal team, or indirectly, your shares are paying their legal team. Or both.

 

I'll say from the top what this hedge fund shark says is asinine in all senses, but what dysamoria said is equally as crazy. I think people forget what being a public company means, and what being a shareholder is. Shareholders OWN the company. Period. Apple is not Tim's company, or even Job's company, they don't have carte blanche to do whatever they want. You fork over money to own stock as an investment stake in a company for a financial return. There is nothing UNREASONABLE about that. Executives are charged with protecting the interest of shareholders. You can be as vocal about your interests as you want. Most are silent, but what this guy says isn't outrageous, he's (crazily) stating is interests. Don't like the rules? Don't take people's money and go private. 

Laces Out!!!

 

Let's see, Apple had one of the most profitable qtrs ever, had the most profitable calendar year ever, sells records iphones, ipads every quarter (yoy).

 

if Apple commented on every rumor, nothing will ever get done. In addition, if they don't comment on a rumor, does it make it true?

 

The stock took a beating because analysts like to make up numbers.

 

That was fascinating. I thought shareholders owned the company and the directors were, indeed, agents of the shareholders. I stand corrected.

If shareholders want to force management to change AAPLs cash-management approach, they have two direct ways of doing so: through a vote to that effect or by replacing the BOD.  Going to court is a stupid, counter-productive way to go about it.  I hope the suit get tossed out quickly.

 

I'm a long-term AAPL shareholder (since the return of SJ) and I'm sure that a larger proportion of my net assets are tied up in AAPL than Einhorn's.  I'm not happy about the recent share price drop, but I don't want management wasting time and effort on financial games to shore up the price.  Keep focused on the next generation of insanely great products and we'll be fine.  Or not, but that's still the right strategy.  Worrying about stock price based on the latest rumor and analyst prediction is a fool's game.

'Hedge Fund Managers' are part of the financial system that destroyed our economy.

 

If we can drone strike American born terrorists, why are these guys out of bounds?

 

 

 

Mmm...  What do you, personally, invest in?

Well said malax.

 

Terrific contribution to this discussion.  I encourage everyone to read this short essay before posting on this topic.  It's very informative and somewhat surprising.

"There is no reason Apple needs to hoard so much cash."

Unless they want to use it for development to scoop the market with another big advance that no one sees coming. Nah, they'd never pull a stunt like that...

"Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money."

That assumes the only reason Apple has money is because the shareholders gave them some. It utterly ignores the idea that a company sees gains and is supposed to manage its assets for consistent return and opportunity.

"Maybe Apple really needs a little prodding to take care of its stable long time investors..."

I *didn't* buy 100 shares of Apple at $24 in 1984. Bought a $2,400 used Subaru. At the time, borrowing for the car would have cost me 10%, and Apple was returning a few percent per year. So no brainer, right? Unless I was thinking like a long-term investor. Which with the three splits, I'd now have 800 shares of AAPL at an effective purchase price of $3 and could have sold it maxed at $700 per share and be writing this from my island lair. I think Apple has taken great care of anyone who's been in it for the long haul.

I can't believe somebody actually typed this.

Vote with the board folks.

This guy is a greedy SOB who cares only about ripping off all the money in the world for himself.

Tell him what to go do with himself.

I always laugh when people say Apple is doing nothing with their money.

 

Nobody knows what Apple has planned for the future. It's often rumored Apple wants to enter TV. Well, it could cost them huge $$$ to compete with the cable companies or to secure deals from all the networks. What if "the next thing" isn't TV at all but something completely different we haven't thought about?

 

I personally think Apple has something in the works. I don't see them looking to have the largest piggy bank in the tech world - at some point they're going to do something with their reserves.

I agree, Apple has been doing pretty damn good and is treated unfairly by the street, but the main thing that matters is how the stock graph looks IMO, and it hasn't been looking good for a while now. Having faith in Apple and the products that they make is one thing, but I see having faith in AAPL as being something completely different.

 

Especially with the impressive results that Apple has had and continues to deliver, they should be able to combat some of the FUD and take the necessary steps to bring the stock back on course. I've written before that hoarding money is obviously not impressing anybody and it doesn't benefit AAPL, so I don't mind if they start spending more of that money.

Haha. For one, the US gov't thinks a year is considered a long-term capital investment. Two, for a hedge fund, a year is a particularly long time. Three, he bought the stock over year ago, which despite recent media frenzy, is still flat to up YoY. So... its not like he's sitting on a major loss (just lost profits). 

 

He thinks the stock is materially undervalued and that management has grossly mismanaged its balance sheet. Frankly, he's right. There's no conceivable use for $137bn in cash. It should be returned to shareholders. The stock trades at a 7 PE ex cash, which implies ~15% cost of capital. Apple is earning 0-1% on its cash balances. How is that efficient capital use?

 

Finally, Apple is self-funded from cash flows and is significantly cash flow positive meaning it can fully fund its massive growth without raising debt or drawing down on its bank account. 

 

You shouldn't attack someone for suggesting a public company has a fiduciary duty to his shareholders.  

There's more to it than that. Suing the company because they don't bend to his will is a lot more than just "stating his interests". He didn't even take it to the shareholders before suing anyway, and now he's saying that he's doing it for the shareholder's interests? If anyone believes that, I have an island for sale.

is it me or does that picture of this guy make you think 'gormless idiot' something about his slightly askew smile maybe....
anyways, I agree Apple could do more to spend it's hoard, but I'd rather they spent it on making the Mac line even more awesome and also dedicating a ton of $$ on making the software line the very best there is. Couldn't do any harm and could do a lot for the PR of Apple.
I mean who really wanted a 'thinner' iMac?

They claim to have significant investments in Apple dating back to 2010 rather than just a year ago.

 

There's also some discussion that his letter may have been prompted as much by Braeburn Capital.

http://www.zerohedge.com/news/2013-01-27/600-billion-trades-four-years-how-apple-puts-even-most-aggressive-hedge-funds-shame

Believe it.

yes but I don't want Apple to spend money just to spend money. In addition, how may multi $billion companies are for sale?

 

Many investors are clueless and rely on analysts and the media. But if you give them facts without commentary, I bet most of those will be happy with Apple's performance and the stock wouldn't have jumped up or down so rapidly.

 

As I said before, if you fight the rumors, you'll lose no matter what. What if a rumor is true and Apple fights it? or if Apple fights all rumors, but let's another rumor fly, does that mean it's the truth?

From what I'm reading Apple wants to get rid of an option to issue preferred shares. Why I have no idea. Einhorn wants to keep that option open. How is that bad? Considering Cook sells his shares as soon as they vest I could see why he is against preferred shares....he doesnt have any. Personally I would be happy if they just got on the ball with innovation and creating a larger selection of phones to attract more market share. Eventually they will have to do something with the money and I would be shocked if they dont announce a dividend increase in March.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

 

 

I agree that they shouldn't just spend money wildly on random things, but I'm fairly certain that there are good ways to spend some of that money, a higher share buyback amount, a higher dividend, buy up some good companies, expand into new territories, etc. I'm sure that Apple can manage to think of wise ways in which to use their money so that they will benefit from it.

 

I also agree that most analysts and media are clueless, but the bottom line is that the stock has been performing poorly as of late and Apple needs to address that problem, IMO. 

Time to abolish this concept of a Hedge Fund and their tax shelters.

Apple themselves have one of largest ones, Braeburn Capital.

Ok, I guess being a investor for nearly a year makes you a "long time" investor... wrong!  He bought thinking it was going to go up, and loosing money in his year of stock, and is pissed. Period.

 

150B in the bank, um, how about using it for collateral on all the expanding they are doing... did everyone forget about the new buildings for corporate?  Did you forget about the new storage center for iCloud?  Did you forget about the assembly plant?  Doing all this banks want a bit of collateral for all these long term (going to be nearly a year on some of the buildings... so silly idiots definition for long term) construction.  How about all the other little "projects" going on to expand Apple?  Who's to say that after all the buildings and little "projects" going on next year or so they don't do a major kickback to all the stock holders?  They would not need all the cash on hand for collateral afterwords.  Guess the silly boy missed all those memo's about expanding, and new buildings, etc.

 

Oh and "projects" include all these law suits... you know like the one silly hedge fund manager is doing.

 

So, all I say side with the board, kick the silly boy on his butt, and let Apple do what it normally does... which put that 150B in the bank in the first place...

 

 

 

PS - Yes, it's people like this hedge fund manager that crashed our economy just to fill their own pockets.

How would apple address these problems. They don't comment on rumors. Should they confirm or deny them? If so then the media will keep playing 20 Qs.

In other news, Einhorn voted himself in as Head of the Apple Board of Directors.

Could you point me to an example of a $150bn building? Thanks

A hedge fund manager who has never actually created anything in his whole life, ridden the coattails of companies that actually create real things, and complains when the free money he has gotten isn't as much as he thinks he can get. Sounds like the perfect way to decide how Apple should use its cash.

 

 

Not true.

 

Apple('s BOD and officers) has a responsibility to run the company successfully and profitably.

They have little control over stock price.  Stock prices can be run up to levels not justified by the balance sheet merely by the actions of folks (mostly institutional investors) trying to game the market. (It can also be run DOWN to levels not representative of the company's true value.)

It could be that the BOD saw $700 as an unrealistic price and therefore saw no need to try to maintain it... perhaps they see $500 as a more realistic price based on their REAL knowledge of how the company operates.

 

 

It doesn't mean the shareholder is the CEO of the company. Cases in point: Palm, HP. Without shareholder interference, those would probably still be around. Well, HP is "still around". Sort of.

Agreed. Anyone arguing that the company is not successfully and profitably run should go take a hike.

At some point Apple should go private, imho.

You can sit down and relax.

 

While the article cited does describe the technicalities in factual terms, in the real-world dynamics of influence a company needs to satisfy shareholders or risk losing that investment.

 

My AAPL shares are modest and I don't have an opinion on this specific suggestion; I see merit both ways.

 

But if enough shareholders agree with it, it would be troublesome for Apple to ignore them.

 

The regulars here can have all the fun they want with Dell's decision to go private, and indeed given Dell's history it's anyone's guess as to whether they'll be able to make use of their new-found freedom.

 

But freedom it is.  Investors are short-sighted and often distracting from a company's long-term goals.  If you want public money, you're beholden to the public. 

 

investors may not "own" a company in the strictest sense, but they do indeed pwn it.

You're forgetting also that with that cash, Apple can afford to never again borrow. Any idea how much all this borrowing has cost the economy over the last decades?

 

Case 1: you get money lent, and you have to repay it.

Case 2: you don't get money, and you die, or at least are impeded in your growth, possibly overtaken in the race to the top by a competitor, or bought out.

 

I keep my opinion: don't like the way the company is run, get the **** out. Apple's transparent towards shareholders, contrary to big banks, or (*coughs*) hedge funds. 

It's a bit more complicated than that, afaik. The investors can vote to change the CEO, but they'd have to demonstrate that the CEO knowingly made wrong decisions for that suit to have any sense... (for profit, because his ego blinded him, whatever). Tim Cook's arguably the best supply chain expert in the world, an excellent leader of men, and respected by his whole company, and he's proven to have vision as regards the market. It would be a very, very hard proposition to make that he failed knwingly...

Whose problem is that? Einhorn's or the average AAPL shareholder's?

 

 

Of course a public company's fundamental fiduciary obligation is to its shareholders. Period. But the idea of a perpetual preferred is hare-brained.