Hedge fund manager David Einhorn sues Apple over $137B cash hoard - Page 3

Agree wholeheartedly.

 

There are even fewer -- perhaps zero -- multibillion dollar companies that are undervalued and from which Apple can create significant synergies.

 

Apple has NO fiduciary duty to "protect stock price". First, a fiduciary duty is a specific legal obligation and they would need to have control over the stock price before that duty could even start to arise. Second, there is a huge myth in this world that a company has a duty to focus on shareholder value. That claim only arose in the 1970s and has been a terrible change to business that create real goods and services. It is the root cause of the short term decision making that has destroyed many companies. The real obligation of a company is to obtain new customers and retain its existing ones by creating and selling a compelling product. That is the absolute best way to create long term shareholder value. Of course, for a hedge fund that is looking to increase the short term valuations of their funds, the long term approach doesn't match up. And that leads to the kind of crap that you and Einhorn focus on.

 

One more thing, do you really think Apple just has that cash sitting in a bank account? It has short term investments that are liquid, but earn a return.

The problem is this:

 

$150 Billion in cash and short term investments.

$40-$50 EACH YEAR from operations

$15 Billion each year in buybacks and dividends

 

So how much cash does Apple need?  Isn't $150B enought?  At this rate they will increasing their cash pile by 25-35 billion each year.  And why?  To earn 1% interest? They need to either increase the dividend or make it clear that acquisitions are coming (they don't need to say who or what).  If not it makes Apple look like they don't give a crap about the investors.  And that's one reason why the stock is stalling.

" So if Einhorn can persuade the shareholder majority, or whatever the company rules of incorporation define, to do anything, then that's the way the ball will roll. Thats the capitalist system."

That's all and good, but this young punk 1-percenter and his horde only showed up a couple of years ago, and this article makes it pretty clear that he's NOT trying to work with the shareholders as a whole but is instead trying to use our tax money to get the courts to do it for him. I know that his fund has a lot of money invested, but not so much in the larger scheme of Apple's total finances. If someone was to go out on the street, buy 1 share of Apple stock, then pursue an agenda through the courts because they cannot persuade the majority of stockholders, they would be met with snorts of derision. This doesn't sound very different.

"Capital trolls" sounds like a pretty apt description.

Now, this is typical of the misinformation you post about Apple. (i) Braeburn is not a 'hedge fund' (look up what that phrase means); (ii) It is fundamentally an asset management business with a primary focus on managing tax savings from Apple's cash; (iii) Apple generated interest income of about a billion dollars for all of 2012, on an average cash base of about $100B, i.e., ~1% return -- does that look like a hedge fund to you?

I agree that Apple shouldn't be commenting on rumors. There are countless dumb rumors every day, and it would obviously be foolish for Apple to start getting involved in every dumb rumor about Apple.

 

I was just thinking that Apple should try to figure out a way to change the narrative, to control it. Exactly how is the $20,000 question. 

1% return on $100 Billion is a disgrace.  Apple shareholders should be appauled at this lack of capital management.

 

Apple needs to do something in Feb meeting. Increase the dividend, buyback, or at least make it know they are looking for major acquisitions.  Doing nothing is losing money.  It sucks to have a 1% return on capital.

 

Also just from free cash flow Apple gets $35-$40 billion a year.  A big chunk of that money should be returned to the investor.  $150B is enough for an emergency. PERIOD.

You must be naive if you think it's all cash in a saving account. They invest it or Tim Cook swims in a vault of gold coins.

No company announces it is acquiring companies until the deal is made. Why should Apple be any different?

If you can't handle Apple's secrecy, get out and stop whining.

Easy.  Do what all the other companies do.  Make threats in private or totally humilate writers who are spreading lies.  Other companies do it all the time.  It's business and its ugly.  Its the game, Apple needs to play it.

 

The biggest problem to me is this:  All the negative talk on the news about Apple dying can have a negative impact on the brand image.  When people on CNBC say Apple is struggling don't you think the consumer may think the brand is hurting to? 

You need to brush up a bit about the history of corporate governance in the US.

 

For starters, please do a search for the following three phrases: (i) Michigan Supreme Court Dodge v. Ford; (ii) MBCA; (iii) ALI Principles of Corporate Governance Section 2.01.

 

You are naive.  The $130 billion is in cash and very liquid investments which can easily be converted to cash.  They are only making a 1% return on that huge cash pile which is a joke.

 

Apple does not need to say who/what they are acquiring.  They just need to make it clear that that's what they are reserving the cash pile for.

 

I have a right to whine because I'm an owner of Apple.  So you are telling me when you own a business and things are not going the way you want it you just quit?

How dare Apple have the most profitable calendar year in human history. How dare Apple keeps selling record amounts if iDevices. How is a larger dividend going to make Apple better?

Not in a million years. Companies get badly burnt by silly strategies like this.

 

Arguably, something like this was beginning of the end for HP (see, e.g., http://www.nbcnews.com/id/14721854/ns/business-us_business/t/hp-investigators-hacked-reporters-phone-data/#.URP60qV3yfQ).

1% on $130 billion is $1.3 billion which is not a joke in anyone's book.

You can fight stupid analysts with facts. That's what they do when they release earnings. They don't control the media.
Apple doesn't need to announce anything until the deals are done. How much do you have in your bank account. I think you should announce specifics of what you're going to do with your money.

You don't own Apple. You own stock. You didn't put any hard work into the biz. You probably have less than 0.000001% as a stakeholder.

It looks like a hedge fund to the article's author. (No relationship by the way before you ask if he's my cousin)

 

There's some additional background on Braeburn here for those curious:

http://www.zerohedge.com/news/2012-09-30/presenting-worlds-biggest-hedge-fund-you-have-never-heard

Edited by Gatorguy - 2/7/13 at 11:27am

I think that a 1% return is a joke. And investors obviously aren't impressed by $1.3 Billion. I'm not. If a more than $130 Billion cash pile is not doing the stock any good, then what's another Billion or so?

 

Any bum can sign up for Ally bank and deposit a buck and get almost a 1% return.

No.

Be realistic.

http://usatoday30.usatoday.com/money/perfi/columnist/krantz/2011-08-09-apple-cash_n.htm

The cash and cash equivalents is roughly 10% of the publicly claimed cash numbers.

 

People complaining about a for-profit company having "enough" cash. Claiming this is a "problem". That's hilarious.

 

You want to know their plan for it? Their plan is to never be anywhere near bankruptcy again, ever, until society changes enough to no longer require money. Their plan is to have multiple centuries worth of financial security for their company and its employees. Their plan is to always have on hand enough money to do whatever they want to do whenever they want to do it. To be able to respond to any change in the market, and to have the financial security to return to not only their feet, but a running pace, if they ever screw up. To be able to purchase any patents, companies, or other resources when opportune. To be able to invest in manufacturing plants and third-party companies for components.

http://appleinsider.com/articles/12/07/19/made_in_america_apples_supply_chain_increasing_us_production

http://appleinsider.com/articles/12/12/06/foxconn-seeks-expansion-to-us-as-apple-gears-up-for-made-in-america-macs

http://appleinsider.com/articles/12/12/26/rumor-apple-to-build-mac-mini-in-us-starting-next-year

Edited by Tallest Skil - 2/7/13 at 12:15pm

The latest breakdown is here:

http://seekingalpha.com/article/1159991-is-apple-s-secret-hedge-fund-prepping-for-a-dividend-boost?source=google_news

 

Well, there are already plenty of scholarship/grants (jobs upon graduation) for those who want to study math/science/engineering now, but many Americans still shy away from hard subjects.

 

Apple has no obligation to carry out any actions as you've described.

 

Frankly, I'd buy back Einhorn's shares at the current market value and "fire" him as a stockholder.

Sounds like another wall street douchabag to me.

By the way apple pay your taxes like the rest of us.

Agreed, but who said anything about a shareholder effort to oust Cook?

 

I was merely referring to them investing elsewhere (which could conceivably have the some outcome, but not directly and not even likely).

 

They do. Don't start that again…

Just because some moron bloggers says so doesn't make it so. Most of the links that you provide are trash like this. That's why you can't blame me for thinking that you must be promoting some of these sites, and perhaps because they are related to you.

 

You also never really answer the questions you are asked. Time and time again, you'll pick one, go off on a tangent, and ignore other substantive questions.

 

So, let me ask you again: Do you know what a 'hedge' fund is? If so, please define it for us. Does earning a return of 1% sound like a hedge fund operation to you? (No need to show me statistics of some hedge fund that might have actually earned that return; the question really has to do with Apple's investing style with its cash. If you don't know how to answer my question, I'd be happy to try and find some credible links on Apple's investment approach to its cash).

Thanks. I just grabbed the first apropos article I could find on the subject, I forgot to mention it's two years out of date. "cash" is a term that's very loosely defined when Apple's is discussed, anyway.

This is not correct. That will give you the wrong number.

 

At a minimum, you have to add Short-term Marketable Securities to Cash and Cash Equivalent under Current Assets -- the two together, from the Balance Sheet for the latest quarter (you can look it up in Apple's investor website), total $16.2B + 23.7B = $39.9B. And even then, the two together only give you Apple's financial securities holdings with a maturity of less than one year.

 

Since most of Apple's cash has been sitting around for longer than a year, it has been moved to Long-term Marketable Securities which, as of the end of the latest quarter, amount to $97.3B. (Now you can see where the $137B number comes from -- it is $39.9B + $97.3B; it turns out that on this aggregate amount, they've been earning a return of about 1%).

 

Edit: I see after I posted this that gatorguy actually provided a useful link that answers your question! Thanks, and hooray! There's hope yet....

Edited by anantksundaram - 2/7/13 at 12:10pm

Did Apple ever promise to spend lots of its cash to lure investors to buy its stock? Did this guy not do any research into Apples business practices before investing in the company? If so he knew what Apple was about beforehand so why is this such a big deal to him now? He is just trying to see if Cook and co. will blink now that Jobs has been gone awhile. If you don't like the way the company runs sell the stock. Quit crying.

But that assumes you can find the trained labor, materials, supply chain, components etc. to support the gargantuan scale that Apple needs.

 

As an aside, Apple has started to do exactly this.

This guys proposal is to issue new share which will no be offer to the general public and allow owners of those share to siphon off the money without out it going to the over major share holders.

So allow only those who are rich enough to buy these preferred shares. neat trick wouldn't say.

No sir, I don't have an in-depth knowledge of investing either. All I really know of hedge-funds is what I've read. I don't have any money invested in one either, nor any other tech stock for that matter. I tend to invest in new businesses and/or expansion of existing ones. I look at it as a safer investment with better returns than playing the stock market. Particularly true if the market is as heavily manipulated as you and most others here say.  IMHO that would put a lowly individual investor like me at a severe disadvantage so why play?

 

BTW, what questions have I ever avoided answering? You make it sound like a habit of mine (time and again??). It sounds more like a red herring. 

Those that can do, those that can't become Hedge Fund Managers. :-)

Bottom line is this:

 

having $140 Billion doing nothing but returning 1% is horrible for shareholders and the company.

 

Apple will net about $20-$25 billion more this year in cash. (after dividend / buybacks)

 

Apple needs to let investor know if this cash will just be wasted away return 1%

OK, if they're only getting 1% on that much money, then something is wrong. I expected that it would be a lot better than that. So I agree on that part with Einhorn, but I don't agree with the way he's trying to fix it, at least the timing of the lawsuit, or the specific changes he demands.

 

Oh I don't know, if you wanted to buy Samsung Electronics....

Oh great. Now the arguements start here too. Basically if the share holders are in it for the money then sell the apple shares and buy stock of another company that will pay big enough dividends for them. It's not like you have to keep the shares you have! That's the point of the stock exchange! Honestly some people would rather sue than actually trade. Both in my opinion are sleazy and dishonest but at least traders make no bones about being ruthless!

..... and shut it down (like Oracle did with PeopleSoft)...... ;-)

You truly, really need to stop smoking whatever it is you bought on the street.  Your humor is getting old.

Great - another D-Bag - as if we don't have enough.

Who is John Galt?

My GOD - all these people that don't do SHIT - complaining that Apple is making too much money and not giving it to them fast enough. Maybe Apple should pull a Dell and go private. Then we can laugh as all the of Wall St. masturbates with their $100 bills - only to realize the party is over - that the cash tree has dried up - and the locus and lemming herd need to go find a different company to manipulate and rape.

Personally - I don't give a rat's ass about their stock. I care about great products. If it takes having $100B in the bank to make great products - then so be it. What do I care?