Apple responds to Greenlight lawsuit, says preferred stock won't be barred
Apple on Thursday issued a public statement in response to a lawsuit from hedge fund Greenlight Capital, revealing that the company has been holding "active discussions" on what to do with its $137 billion in cash, while also disputing the assertion that the company hopes to prevent the issuance of preferred stock.
The statement made by Apple comes in response to a high-profile lawsuit filed earlier in the day by Greenlight and the fund's manager, David Einhorn. That complaint accused Apple of having a "problem" of hoarding cash in a manner that is a disservice to investors.
For its part, Apple said it welcomes Greenlight's views, though it disagrees with the fund's take on "Proposal 2," an item up for vote at the company's annual shareholder meeting later this month.
"Contrary to Greenlight's statements, the adoption of Proposal #2 would not prevent the issuance of preferred stock," Apple's statement reads. "Currently, Apple's articles of incorporation provide for the issuance of 'blank check' preferred stock by the Board of Directors without Shareholder approval."
Apple contends that the passage of Proposal 2 would give shareholders the right to approve the issuance of preferred stock.
Earlier Thursday, Greenlight and Einhorn said they believe Apple should give away perpetual preferred stock with a 4 percent yield. Einhorn advised investors to vote against Proposal 2, which Apple is recommending, because he believes it would eliminate preferred stock from Apple's charter.
But Apple's statement made on Thursday refutes the claims by Einhorn, suggesting that his idea of preferred stock could still be on the table. Einhorn believes that by distributing preferred stock, Apple could tap into new value for shareholders while leaving its massive cash hoard largely untouched.
Apple was questioned about its cash and reserves during the company's quarterly earnings report last month, and Chief Financial Officer Peter Oppenheimer responded by saying Apple "continuously" assesses opportunities for its growing cash, which totaled $137 billion as of the conclusion of the December quarter.
"Combined with our dividend, we returned about $4.5 billion of cash this quarter, and we started the buyback program and expect to return about $45 billion over three years to our shareholders," Oppenheimer said. "We do consider increasing these programs and we'll do what we think is in the best interest of our shareholders."
Apple's statement issued Thursday afternoon follows in its entirety:
The statement made by Apple comes in response to a high-profile lawsuit filed earlier in the day by Greenlight and the fund's manager, David Einhorn. That complaint accused Apple of having a "problem" of hoarding cash in a manner that is a disservice to investors.
For its part, Apple said it welcomes Greenlight's views, though it disagrees with the fund's take on "Proposal 2," an item up for vote at the company's annual shareholder meeting later this month.
Apple says Greenlight is wrong: The passage of Proposal 2 would give shareholders the right to approve the issuance of preferred stock, but won't ban it entirely.
"Contrary to Greenlight's statements, the adoption of Proposal #2 would not prevent the issuance of preferred stock," Apple's statement reads. "Currently, Apple's articles of incorporation provide for the issuance of 'blank check' preferred stock by the Board of Directors without Shareholder approval."
Apple contends that the passage of Proposal 2 would give shareholders the right to approve the issuance of preferred stock.
Earlier Thursday, Greenlight and Einhorn said they believe Apple should give away perpetual preferred stock with a 4 percent yield. Einhorn advised investors to vote against Proposal 2, which Apple is recommending, because he believes it would eliminate preferred stock from Apple's charter.
But Apple's statement made on Thursday refutes the claims by Einhorn, suggesting that his idea of preferred stock could still be on the table. Einhorn believes that by distributing preferred stock, Apple could tap into new value for shareholders while leaving its massive cash hoard largely untouched.
Apple was questioned about its cash and reserves during the company's quarterly earnings report last month, and Chief Financial Officer Peter Oppenheimer responded by saying Apple "continuously" assesses opportunities for its growing cash, which totaled $137 billion as of the conclusion of the December quarter.
"Combined with our dividend, we returned about $4.5 billion of cash this quarter, and we started the buyback program and expect to return about $45 billion over three years to our shareholders," Oppenheimer said. "We do consider increasing these programs and we'll do what we think is in the best interest of our shareholders."
Apple's statement issued Thursday afternoon follows in its entirety:
By early last year, Apple?s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.
We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.
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. We welcome Greenlight?s views and the views of all of our shareholders.
As a part of our efforts to further enhance corporate governance and serve our shareholders' best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight?s proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight?s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple?s articles of incorporation provide for the issuance of ?blank check? preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.
We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.
Comments
We are now 5 weeks into 2013, so you could add another ~$10 billion to that figure.
Who knows when(if) they actually re-purchased the shares but at recent prices (~$455 before this afternoon's announcement) that would be about 5.5 million shares off the street.
Tim, tell the whiners to "get bent".
Also, it appears what Greenlight wants Apple to do is issue new preferred stock, and start paying high dividends on those new shares.
It phrases this as "giving back to shareholders," but it does nothing for current shareholders. It just creates a new class of financial paper designed to syphon cash from Apple's reserves exclusively to a group of new investors. And somehow, this reduction in Apple's cash reserves is supposed to be good for Apple's current shareholders because it will somehow lift the share price.
This sounds like trickle down economics, where the middle class is "helped" by the disbursement of public funds to the rich, who "create jobs" and invent prosperity out of thin air. Something that has never ever happened. Apple can give its cash to a bunch of new plugged in "investors," but it would seem more consistent with the company's values to either use that cash or to distribute it to its existing shareholders, not create a new type of paper to enrich the hedge funds who have gamed the market and helped depress Apple's stock prices in cycles to create short term gains out of the backs of long term investors.
Terrific news for AAPL longs. About time a brilliant investor and hedge fund titan like Einhorn step in and open the eyes of the InCompetence in Cupertino. Enough destruction of shareholder value, Apple's image and its public perception, and it only took several months late.
The next step is to strike the Samdung dogs back, and start being the leader in innovating again. David Einhorn for special advisor to Tim Cook!
Those of you calling for Apple to give the money to investors are frankly just short term thinking idiots.
(oh and I'm fully AAPL long and would be one of those who would supposedly 'benefit' from frivolously throwing money down the drain.)
Rather than moan that the stock has dropped, use you brain and realise that this is a short term negative blip and the product of 100% pure manipulation. Buy more shares and capitalise on the situation, rather than moan about it. These dips are your friend, not your enemy.
There is SO much more money to be made on the return journey, than whatever handouts you desire in the form of dividends.
Originally Posted by AppleInsider
Apple on Thursday issued a public statement… …revealing that the company has been holding "active discussions" on what to do with its $137 billion in cash…
Isn't swimming in it enough?
The whole Greenlight proposal, indeed much of Wall street's ideas I would describe as extortion.
These are like, their demands. You kidding me?
Quote:
Originally Posted by monstrosity
Those of you calling for Apple to give the money to investors are frankly just short term thinking idiots.
(oh and I'm fully AAPL long and would be one of those who would supposedly 'benefit' from frivolously throwing money down the drain.)
Rather than moan that the stock has dropped, use you brain and realise that this is a short term negative blip and the product of 100% pure manipulation. Buy more shares and capitalise on the situation, rather than moan about it. These dips are your friend, not your enemy.
There is SO much more money to be made on the return journey, than whatever handouts you desire in the form of dividends.
Better Apple have a plan for their excess cash than wait for the IRS to penalize them for it. I'm curious to those that prefer the status quo (even though Apple agrees with those of us that want to participate in some of the profits). At what point do you start speaking out for distributions or buybacks? When Apple has a trillion in cash on hand? Two trillion? More?
Quote:
Originally Posted by Corrections
Also, it appears what Greenlight wants Apple to do is issue new preferred stock, and start paying high dividends on those new shares.
It phrases this as "giving back to shareholders," but it does nothing for current shareholders. It just creates a new class of financial paper designed to syphon cash from Apple's reserves exclusively to a group of new investors. And somehow, this reduction in Apple's cash reserves is supposed to be good for Apple's current shareholders because it will somehow lift the share price.
This sounds like trickle down economics, where the middle class is "helped" by the disbursement of public funds to the rich, who "create jobs" and invent prosperity out of thin air. Something that has never ever happened. Apple can give its cash to a bunch of new plugged in "investors," but it would seem more consistent with the company's values to either use that cash or to distribute it to its existing shareholders, not create a new type of paper to enrich the hedge funds who have gamed the market and helped depress Apple's stock prices in cycles to create short term gains out of the backs of long term investors.
Actually, the preferreds would be issued to existing shareholders, not new ones. You would have a class of common shares and a class of preferred shares stapled to the common. You're free to sell the preferred to new investors or hold on to it and receive your dividend.
His proposal is 4% on $50bn which means effectively $2per share more in total dividends in addition to apples existing $2.65 per quarter.
Einhorn thinks that the common shares aren't getting credit for Apple's cash and the issuance of interest bearing securities will unlock the value of that cash. This has absolutely nothing to do with "syphon"ing cash away to a new group of investors.
I'm glad we have financial leeches like Einhorn to point out issues with one of the greatest, most profitable companies on the face of the planet...
Quote:
Originally Posted by broadbean
Great PR response.
That's all it is.
Standard legal boilerplate response to a hedge fund nuisance at the door. Nothing to see here....
Except now this guy and every other douche will think that making a wild claim against Apple will result in an official Apple response.
Quote:
Originally Posted by Gigawire
Back in Steve's day, no response would have been given. Loving Cook's approach to things.
That would not be an option. He (or the Board) would have to respond to such 'material' events. Doesn't matter whether Apple likes it or not.
Quote:
Originally Posted by anantksundaram
That's all it is.
Standard legal boilerplate response to a hedge fund nuisance at the door. Nothing to see here....
I think its a bit more.
That they responded so quickly illustrates that 1) they consider this an important issue 2) they've likely been thinking about the issue and anticipating an action like Einhorn's.
Also, they went beyond boilerplate when they said that have much more cash than they need to run their business since early last year. The implication of that statement, along with the continued repetition that they are evaluating options implies they are up to something.