Greenlight pushes Apple to offer 'iPref' preferred shares - Page 2

One more point: One thing that is stopping Apple's share price from going up is its massive cap size.  Its over $400 billion dollars.  When it was $700 a share it was at over $600 billion.  That could simply be too much capital for the financial system to support for one stock.  But by separating the stock you would not need additional cash.

 

Current price: $450 share = 425 Billion

Pref Stock: $250 share = 220 Billion

Total Cap: 645 billion

 

But lets remember that the Pref Stock does not require any new cash from investors.  The net cash paid out for the stock is still $425 Bil even though the combined Market Cap is now $645 Billion

 

Monopoly for Amazon and Google.  No way.  Walmart is the real competitor for Amazon and Google could easily get competition if Apple was serious with Siri

 

Amazon is retail.  Walmart is retail. PERIOD.

 

You'll be amazed what $150 Billion can do for Siri.  Apple just needs to say the word and they can be a real threat to Google search (for starters buying Yahoo and a bunch of smaller search companies).

 

Don't forget that 80% of Google's mobile search revenue comes from iOS devices.

 

I'm really having trouble understanding this pref stock idea and I don't think I'm the only one.  Wouldn't doing the above cause both the common and preferred shares to plummet such that their combined marked cap is 425B?  I don't understand how 220B could be pulled out of thin air.

 

I guess part of the problem is I don't know what the magic behind these preferred shares is.  What dictates their value?  I can see how issuing them for sale at $250 each would set their initial value but if the idea is to just give them to existing shareholders how is their value established?  Wouldn't their value be established once the existing shareholders start selling them?

 

I think this an interesting idea & all, but frankly I think it may be too confusing for the average investor.

 

The pref shares are getting their value based on the 4% yearly dividend and the ability for Apple to pay those dividends for a long time.  Because of the financial strength I'm pretty sure these shares will be rated at AAA+ and will sell at greater than face value on the open market.  The buying the Pref stock from the common holders who elect to sell their shares are buying a fixed income instrument. 

 

I agree that if the two classes of stock could not be sold seperately the stock price would tank.  But since you can sell one and keep the other it will maximize its value in the open market.

 

Basically the plan is using Apple's amazing cash balance, no debt, and future cash flows to float preferred stock that will garner a high rating = market price close to face value or above.

 

I believe the common shares will drop in price in the short term because a portion of the Net Income will be lessened by the dividends paid to pref stock.  But I think its nearly impossible for the common shares to drop below $300.  In about a year Apple will have about $200 per share.  Their yearly earnings is $30bil for common ( $40bil - $10bil for preferred div). That means Apple would have a PE of 3.3 sans cash.  That is totally ridiculous.  More relistically the shares would be between 350-400.  Thus the combined valued of the common/pref would be $600-$650.

I want to compliment Neil Hughes on a very informative article. The tables used are the best I have seen anywhere with respect to this issue of iPrefs, and make the whole proposal clear. Well done!

I believe the proposal is a very good one, and clearly clever,as Cook himself said. I support it, and do think that it will increase the price of AAPL shares. Long AAPL.

I find that if this idea were such a great benefit to both the shareholder and the company, it would be widespread across the globe. Why it is not, is why I am more than hesitant. The other critical component, is whenever I hear of another great idea espoused by anyone wealthier than I am, is why would they want the rest of us to gain from what would work best for themselves?

 

Sorry but supposition from Mr Einhorn, that Einhorn predicts that iPrefs distributed at a ratio of five shares per one share of common stock would pay out $250 to investors, while also lowering the current stock price from $450 to $350. But the total value of the iPrefs along with the new common stock price would be $600, or about $150 greater than its current value of around $450.

 

If 5 shares of Preferred value are gained at $250 in total, and only $100 lost from 1 share of common value, then the gain would be $150 added to $350 which would equal $500, not $600. Playing with numbers can sound great but not always work out so great. I say, let Einhorn, play with this theory, with HIS REAL MONEY for 1 year, not his investors money, and see how his personal portfolio, which he should post online for all of us to watch, before AAPL agrees to follow this for the rest of us.

 

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