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Apple likely to have broken SEC rules with 'bundled' proxy proposals, judge says

post #1 of 24
Thread Starter 
The federal judge presiding over Greenlight's suit against Apple said that the hedge fund's case has a "likelihood of success," agreeing that the Cupertino company probably broke Securities and Exchange Commission rules when it placed three items into one proxy proposition.

Greenlight


In a hearing on Tuesday, U.S. District Judge Richard Sullivan sided with counsel representing David Einhorn's Greenlight Capital on the so-called "bundling" argument, which alleges Apple broke SEC rules by placing multiple issues up for shareholder vote into one proposal, reports Fortune.

"Candidly I do think the likelihood of success is in favor for Greenlight on the merits," Judge Sullivan said.

However, the jurist failed to reach a decision as to whether the hedge fund would be irreparably harmed by Apple's proxy proposal, a requirement for an injunction against a shareholders vote scheduled for Feb. 27. He added that even if an injunction was issued, Apple still has the power to not grant the preferred stock Einhorn is fighting for.

According to the publication, Judge Sullivan appeared to lean toward a "wait-and-see" scenario set forth by Apple.

"It's a mess no matter what I do," he said.

Greenlight's lawsuit argues that Apple's "bundling" of three items into one proposal in its proxy statement goes against SEC rules. In particular, Einhorn takes issue with Apple's so-called "Prop 2" proxy proposal which, If passed, would remove the power to issue preferred stock from Apple's board and put it in the hands of shareholders.

The hedge fund is seeking the issuance of perpetual preferred stocks, dubbed "Greenlight Opportunistic Use of Preferreds" or "GO-UPs," that would pay out higher than normal dividends and mete out some of Apple's $137 billion cash hoard.

In response to the allegations, Apple claimed last week that the GO-UPs would only enhance Greenlight's financials and "do not serve the public interest."

Judge Sullivan said a ruling would be reached before the scheduled shareholders meeting next Wednesday.
post #2 of 24
Quote:
Originally Posted by AppleInsider View Post

In a hearing on Tuesday, U.S. District Judge Richard Sullivan sided with counsel representing David Einhorn's Greenlight Capital on the so-called "bundling" argument, which alleges Apple broke CES rules by placing multiple issues up for shareholder vote into one proposal, reports Fortune.

 

Oh no, now Apple will never be invited back to "CES." 1wink.gif

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #3 of 24
It's hard to imagine how Greenlight can honestly see itself good for Apple shareholders.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #4 of 24

I have to say, I still don't quite get what Greenlight wants (other than money.)

It sounds like they want free money, in perpetuity, on a preferred basis, at my [shareholder's] expense.

Is that right?

post #5 of 24
Quote:
Originally Posted by AppleInsider View Post

dubbed "Greenlight Opportunistic Use of Preferreds" or "GO-UPs,"

Or Go, U Prick. What a mess indeed. How selfish this Greenlight company, completely beyond me.
I’d rather have a better product than a better price.
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I’d rather have a better product than a better price.
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post #6 of 24
Quote:
Originally Posted by DESuserIGN View Post

I have to say, I still don't quite get what Greenlight wants (other than money.)

It sounds like they want free money, in perpetuity, on a preferred basis, at my [shareholder's] expense.

Is that right?

 

They want to change the world. /s

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #7 of 24
Quote:
Originally Posted by DESuserIGN View Post

I have to say, I still don't quite get what Greenlight wants (other than money.)

It sounds like they want free money, in perpetuity, on a preferred basis, at my [shareholder's] expense.

Is that right?

 

Actually every shareholder should get preferred stocks if they get it, afterall they're also just shareholders and nothing more.

 

My understanding of what they want is - they want AAPL to release more of the cash in hand without paying tax (back to US) using preferred stocks, while the management is not really interested in doing so, for whatever reason. 

post #8 of 24

This jumped up prick is essentially challenging Apples BOD to manage its own business.

The same BoD that has got Apple into this position.

Thats what this case is about.

If he wins - what's next a vote of no confidence in the BoD ?

If he wins and gets a settlement because of irreparable harm then watch out America.

 

There's a number of strategies the BoD can use to benefit all.

Give preferential shares to all.

Give preferential shares to none.

Return profits only to those shareholders countries that the profits originate in.

Many others but Im no international lawyer so can't really comment further.

 

The judge Sullivan - phht. Well, lets just say he appears to be biased.

Greenlight may have a little, leeetle case for bundling, I'd suggest that's the SECs problem. They let the Apple proposals go through.

Irreparable harm ? - FO. Here's a buck, thanks for wasting the courts time. You win but you lose, jerk.

post #9 of 24
Most of u i think have it wrong.
Einhorn isn't telling what apple should do with its business, he giving apple no brain financial advice.

Others on wall st continue to tell apple it should make this (iphone mini) or do that (buy twitter and nflx, i agree!).

He is just giving them sound financial advice, solve two issues. How to continue to have a sovereign wealth fund operation in Nevada ($200billion by years end), and rewarding investors who by definitions are owners of apple (Einhorn being a large one, as he is also probably heavily invested in his fund).

My issue regarding this is simple...i look at Skype acquisition by msft, offshore cash, bought company that will basically return msft a higher than the fix income return it was getting on its overseas cash, and build msft ecosystem.

Apple should deploy cash like that now, why get treasury or low rate returns on all that money, when u can buy nflx, ebay, or god knows what other dominate vertical player and ad to ecosystem, get above fixed income return.

Or buy back stock, cause apple is still growing faster than its investment returns and i still think its one of the best investments around, and apple management should agree.

I like buying some key players, this market is still in play (slight weakness between mow and tv, iwatch, new fingerprint homebutton
iphone)....i think nflx is the cable company of future now its making original content, and like the nflx- disney content -apple tie -up
post #10 of 24
Most of u i think have it wrong.
Einhorn isn't telling what apple should do with its business, he giving apple no brain financial advice.

Others on wall st continue to tell apple it should make this (iphone mini) or do that (buy twitter and nflx, i agree!).

He is just giving them sound financial advice, solve two issues. How to continue to have a sovereign wealth fund operation in Nevada ($200billion by years end), and rewarding investors who by definitions are owners of apple (Einhorn being a large one, as he is also probably heavily invested in his fund).

My issue regarding this is simple...i look at Skype acquisition by msft, offshore cash, bought company that will basically return msft a higher than the fix income return it was getting on its overseas cash, and build msft ecosystem.

Apple should deploy cash like that now, why get treasury or low rate returns on all that money, when u can buy nflx, ebay, or god knows what other dominate vertical player and ad to ecosystem, get above fixed income return.

Or buy back stock, cause apple is still growing faster than its investment returns and i still think its one of the best investments out there, ad apple management should agree.

I like buying some key players, this market is still in play (slight weakness between mow and tv, iwatch, new fingerprint homebutton
iphone)

Either way, i agree with Einhorn about the proxy, very unapple to say the least.

David just wants to have the right to answer three questions to vote on separately. not bundled together as is, really is that to much to ask
post #11 of 24
Foghorn Einhorn:
"
Lets see, 1.3 million shares x current 2.65 dividend or, 1.3 million x 5.30 dividend.

Yep, lets double that dividend!".
post #12 of 24
Originally Posted by cmav5 View Post
Apple should deploy cash like that now, why get treasury or low rate returns on all that money, when u can buy nflx, ebay, or god knows what other dominate vertical player and ad to ecosystem, get above fixed income return.

 

Maybe they don't want to do that. They shouldn't have to.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #13 of 24

agree...its what i would do...but end of day NO company need 200billion (were it will be at year end)....with cash on hand they could buy ANY other player in industry (using apple cash and google cash you have enough, and apple can bridge loan the google cash before buying it and then repay bridge).

 

no common sense for having that much cash making 1%, when you paying 2.3% dividend....you wouldn't do that with your money...and that money is owned by shareholders.

post #14 of 24
Originally Posted by cmav5 View Post
…end of day NO company need 200billion…


Not your call. And it's a silly thing to say.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #15 of 24
Quote:
Originally Posted by cmav5 View Post

but end of day NO company need 200billion (were it will be at year end)

Where does it end? You say Apple doesn't need $200 billion (which they don't have) so are you saying their $130-ish billion is too much? If so, then how much is the right amount to have for their large investments in components, etc.? Surely if one can determine that a certain amount is too much they must then know what is too little and therefore be able to find the exact amount all companies must have. Where is the formula for this?
Quote:
with cash on hand they could buy ANY other player in industry (using apple cash and google cash you have enough, and apple can bridge loan the google cash before buying it and then repay bridge).

Why is spending all the money buying competitors the only think people can think of? I feel bad for people who can't hold money without feeling an overwhelming urge to spend it. I, personally, like to save mine so I can invest in things later as they come up or see myself through a hard time if that should happen. Why anyone would invest in a company that has to walk a fine tether of succeeding every quarter or they collapse because they have no safety net is beyond me, but I also can't understand why Amazon has investors.

BTW, have you considered how the money is dispersed and how little they'd have if they brought it all back to the US (or some other country) just to buy another company.
Quote:
no common sense for having that much cash making 1%, when you paying 2.3% dividend....you wouldn't do that with your money.

So you want them to drop the dividend to 1%. Got it!
Quote:
and that money is owned by shareholders.

No, that cash is not owned (or controlled) by shareholders. They own the share in the company but there is no specific decree of what that share relates to. You don't get a piece of paper that says your shares control cash in a vault Geneva. It doesn't work that way. And, most importantly, if you don't want to continue to invest in the world's most successful company then get the **** out. It's really easy to sell shares. I love Amazon as a company but don't like how they do business for shareholders. Do you know what my solution was? Sell my shares.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #16 of 24
Quote:
However, the jurist failed to reach a decision as to whether the hedge fund would be irreparably harmed by Apple's proxy proposal, a requirement for an injunction against a shareholders vote scheduled for Feb. 27. He added that even if an injunction was issued, Apple still has the power to not grant the preferred stock Einhorn is fighting for.
This is like turning a J-Walking incident into a Whiplash case. It sounds like they have a case that Apple put more than one "proxy proposal" on a ticket -- that's pretty clear cut. But the penalty with something that MIGHT annoy stockholders is to give preferred stock to a company -- making them have more voting power and value. I was going to go "ho hum" until I read that. And sure, it's hard for the jurors to come down with "irreparable harm" from a fricken' proxy vote. Apple is guilty but it's really hard to say if there are damages.
post #17 of 24

well one thing apple doesn't have and needs is CONTENT...and content can only be aquired....

 

Look what YouTube did for Google

Look what PayPal did withEBAY (not content, but bigger than ebay now i think)

 

I am already spending less money on itunes, cause netflix has movies/tv i would have bought/rented on itunes  ALOT...so i have reduced my iTunes bill some 50 a month so far...buy less, rent less...my bill avg over 100 np per month

 

Apple cant come up with a magic answer for content...and nflx is gaining exclusive content like DIS....if someone else bought nflx....what would that do to apple content delivery ability via ipads and tv's

 

some areas apple can innovate...others they cant...and content could be bought by competitors...plus reed said if nflx had 100mm subs, it would be profitable and be able to buy all the content available deals....itunes has 500million subs...

 

Im sorry my nflx ideas is best for ecosysem and worst for cable companies who force us to bundle and horrible for samsung/goog

 

and more profitable than holding cash 

post #18 of 24

My thought on this. Does it really matter if these three items are bundled. Likely not. So tell Apple they have to have three separate votes. And scene.

 

Apple isn't legally bound to do what is best for hedge funds so that shouldn't be an issue. They have every right to not issue preferred stocks etc. given that such shares typically get higher dividends etc which could hurt the common share holder it makes sense that Apple would want to give the potentially harmed parties a veto. Boo hoo to the hedge funds.

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #19 of 24
Quote:
Originally Posted by cmav5 View Post

well one thing apple doesn't have and needs is CONTENT...and content can only be aquired....

 

Look what YouTube did for Google

Look what PayPal did withEBAY (not content, but bigger than ebay now i think)

 

 

While you might be correct, you are also basically thread hijacking. You'll get along better if you don't pull that move. 

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #20 of 24
Quote:
Originally Posted by charlituna View Post

My thought on this. Does it really matter if these three items are bundled. Likely not. So tell Apple they have to have three separate votes. And scene.

That seems exactly right. I can't understand why this judge is making such a big frackin' deal out of the 'bundling'. (Perhaps someone can explain).

 

Just unbundle them and put them up for a vote.?! I have no doubt it'll all pass per management's recommendation.

 

That said, I can't help bit have this growing suspicion that Apple's financial size and scope have begun to tap at Oppenheimer's Peter Principle threshold..... (and Cook's, although, in all fairness, he's an ops guy and that's what Oppenheimer is paid to do.)

 

Apple REALLY needs to fundamentally rethink its investor relations. At a market cap of $450B and being the largest public company in the world, they are not the 'mom and pop' outfit that they were ten years ago. Although, that mindset perhaps still persists.

post #21 of 24

There's no more of a definitive word in the English language than "probably".

 

Apple is probably doing something illegal and it could also probably be legal. So what was just said? NOTHING.

Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #22 of 24
Quote:
Originally Posted by cmav5 View Post

Most of u i think have it wrong.
Einhorn isn't telling what apple should do with its business, he giving apple no brain financial advice.

Others on wall st continue to tell apple it should make this (iphone mini) or do that (buy twitter and nflx, i agree!).

He is just giving them sound financial advice, solve two issues. How to continue to have a sovereign wealth fund operation in Nevada ($200billion by years end), and rewarding investors who by definitions are owners of apple (Einhorn being a large one, as he is also probably heavily invested in his fund).

My issue regarding this is simple...i look at Skype acquisition by msft, offshore cash, bought company that will basically return msft a higher than the fix income return it was getting on its overseas cash, and build msft ecosystem.

Apple should deploy cash like that now, why get treasury or low rate returns on all that money, when u can buy nflx, ebay, or god knows what other dominate vertical player and ad to ecosystem, get above fixed income return.

Or buy back stock, cause apple is still growing faster than its investment returns and i still think its one of the best investments out there, ad apple management should agree.

I like buying some key players, this market is still in play (slight weakness between mow and tv, iwatch, new fingerprint homebutton
iphone)

Either way, i agree with Einhorn about the proxy, very unapple to say the least.

David just wants to have the right to answer three questions to vote on separately. not bundled together as is, really is that to much to ask

I have it all wrong. Forgive me. He's a nice guy after all.

 

uhh, why the claim for irreparable harm ?

You know, seeing as its just about bundling and him wanting to help Apple with its financial decisions and all.

Great guy that he is - you know, concerned shareholder, big investor and all.

Yup he's a prince.

post #23 of 24
IMO Greenlight are damaging there own investment as this kind of action does nothing but drive down the value if Apple shares, making their investment worth less. All this negativity is driving down Apple's value which must be damaging the USA economy as their biggest company is now worth only about 70% of what it was 6 months ago.
post #24 of 24
Probably shouldn't have bundled but really of no consequence since all proposals increased power of shareholders. TC called it a "silly sideshow" because said aapl wouldn't issue another class of stock without shareholder approval anyway.
The proposed preferred issuance (to all common shareholders) I've heard discussed is only for @$50B at 4%--@$2B/yr.. That's less than a 20% bump to present dividend. Any "unlocking value" beyond cash actually paid out as dividends is speculative. On its face the proposal seems attractive (sell the preferred, keep the common) but no one is discussing the downside(s) of Einhorn's proposal, if any. Generally, there is no free lunch
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