Preferred stock seen as Apple's chance to 'seize the opportunity' and reverse losses

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Comments

  • Reply 61 of 81
    You've got your facts twisted. Einhorn is suing Apple over 3 propositions shareholders are to vote on which are bundled together. The law suit is about whether the bundling is legal according to SEC rules. One of the 3 propositions, the one he's against, was thrust on Apple by a group pushing for more transparency for shareholders. Do you see the irony here?

    Secondly Einhorn presented this idea about preferred shares with special dividend rights attached and Apple responded by saying that the idea was creative and warranted study. Further, apple has made statements over the past many weeks since the quarterly results announcement that they were "actively looking at ways to return shareholder money".

    In fact it's not a straightforward thing. 80% of that money is overseas and repatriating that money would mean a huge second tax bite (apple already paid tax on it in the country where it was earned). So only about 20% of AAPLs billions are even eligible to be used. What Einhorn wants is for apple to borrow money in the USA to pay for a special dividend and have to pay back that borrowed money out of USA revenues. Is that in the best interest of shareholders? If you say yes I bet you work on Wall Street.
  • Reply 62 of 81
    ipilyaipilya Posts: 186member
    I wonder.... how low does APPL need to go before $130 billion can be used to take the company private?
  • Reply 63 of 81
    igriv wrote: »
    If you own AAPL, and you need to buy a house, or take a vacation, or retire comfortably, then Apple stock needs to reverse its losses. If you are willing to wait for five years for the next insanely great product, you are in a different position, and can take comfort from how great Apple looks on paper.

    Apple doesn't control Wall Street. The decline of AAPL is unsupportable given Apple's balance sheet, plain and simple. But as any savvy investor can tell you, market psychology is what counts the most in terms of explaining the rise or fall of a particular stock. There's nothing that AAPL can do in the short term to change this. The only reason that Apple has been as successful as they are and has as much cash on-hand as they do is because of innovation.

    Being an investor carries with it a responsibility to stay on top of market trends. This is true with any equity, not just AAPL. Taking a big loss on AAPL is inexcusable considering that the decline is not something that happened overnight. AAPL has been falling for months. If anyone was caught sleeping at the wheel all this time, it's their own fault.
  • Reply 64 of 81


    Originally Posted by iPilya View Post

    I wonder.... how low does APPL need to go before $130 billion can be used to take the company private?


     


    Well, they're on track to have $200 billion in cash by the end of this year. And their market cap is on track to plummet to roughly that in almost the same amount of time.

  • Reply 65 of 81
    elrothelroth Posts: 1,201member

    Quote:

    Originally Posted by igriv View Post


    Einhorn's proposal is that ALL common stock holders would have a part of their holding converted to preferred. How does this hurt you?



    Simple - Apple should decide how they handle their cash, not an idiot who bought stock when the price was high and now wants to save his reputation. If Einhorn's such a genius, how come he waited to buy Apple stock until the price was high, as other hedge fund managers were already lowering their positions?

  • Reply 66 of 81
    elrothelroth Posts: 1,201member

    Quote:

    Originally Posted by igriv View Post


     


    Apple was almost 100% funded by venture capital firms, and Markkula (their first chairman) was a venture capital guy. They survived their "grey days" because Gil Amelio (among other things) managed to line up a line of credit. So, don't knock the money guys.



    Very funny interpretation. Apple was 6 months from bankruptcy when they brought Jobs back. They were losing money at a very fast rate.

  • Reply 67 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by tribalogical View Post


     


    I don't know who you are, but you are unerringly debating in favor of Einhorn's position, and brushing aside all the good sense of those opposed as if they have no validity. How does "Apple stock reversing" have anything to do with 'preferred or not preferred, and WHO gets to decide that"?


     


    You are also painting opposition to Einhorn's position as foolish, short-sighted, etc. This post here works to divide us all into an image of your own making. Two camps. those with the 'luxury to wait around happily cheering on Apple" ('on paper' implies that they aren't as strong as they appear…? seriously?) and "those who need Apple to reverse its LOSSES"….


     


    The STOCK took a hit. Apple hasn't seen any LOSSES in a long while. Apple itself is in fine shape, immensely profitable and with a growing cash pile. Some of us are looking beyond the immediate arguments. I ask, WHY has the stock been hammered, if the company is in such great shape? It reeks of manipulation. And lo and behold, a financial shark (Einhorn) appears in the midst of THAT, going after Apple aggressively regarding changing the earnings game…? And you argue entirely on the behalf of that position? M-hm...


     


    It isn't wise to invest money into the stock market that you had earmarked for buying a house… the stock market is NOT a moderate-to-low risk environment. Vacation money, retirement money… stock market is the LAST place those are invested, or you're putting those at undue risk.


     


    Apple's stock price WILL go up, a lot, and quickly. As soon as people like Einhorn get out of the way and let it accrue naturally. While they're CREATING the downward pressure through carefully timed 'analyst' releases and buying manipulations (based on a background agenda like the one apparent here now), the stock will not mature as it should.


     


    Einhorn will lose the push to allow preferred shares. He will cease his campaign, and the stock will rebound quickly toward where it should be. Why would you have a problem with that?



     


    1, Preferred or not preferred: Einhorn's contention is that issued preferred stock will raise the stock price. I am certain he is right. I am not certain that it is the best way to use the money, but that is for the management to respond to (using the money to cut the margins, as I mention in a different post, is a legitimate strategy which, however, the management is not using).


     


    2. Einhorn, as you would know if you took the trouble to actually learn anything about this matter, is one of the most respected people in finance, and has been a major Apple cheerleader, for several years. His fund holds a lot of apple stock ($600MM worth, I believe, which is a highly nontrivial percentage of their total holdings). If his find is market neutral, this has been a terrible investment over the last several months: Apple is down 30% since the end of September,  while the market is up around 15%, so a market neutral fund would have lost about half of its investment (half a billion dollars -- not chump change). It is not at all in Einhorn's interest to manipulate the stock price downard -- it only hurts his own pocket.


     


    3. You are apparently living on Mars. Most people have IRAs, which are invested in mutual funds, which own a lot of Apple, as do state retirement funds. It has been a stated policy of the federal reserve bank to push these funds into risk assets (stocks), but keeping the yields on safer assets very low (negative, in inflation adjusted terms).  You can debate the wisdom of this policy, but there it is, and the upshot is that people own stocks whether they want to or not.


     


    4. What is your argument against preferred shares?


     


    5. As for my motivation, you know nothing about it. I happen to hold a lot of Apple stock, so talking it down is the furthest from my mind. I agree with Einhorn on many things because intelligent people will often come to the same conclusions when faced with the same facts. Not always, but often. In fact, the Apple management (or much of it) agrees with Einhorn, the notable exception being the CFO Peter Oppenheimer (who is a bean counter, and not a product guy, in case you missed the memo).

  • Reply 68 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by elroth View Post


    Simple - Apple should decide how they handle their cash, not an idiot who bought stock when the price was high and now wants to save his reputation. If Einhorn's such a genius, how come he waited to buy Apple stock until the price was high, as other hedge fund managers were already lowering their positions?



     


    What is "Apple"? The answer is: "the owners of the company" (your answer seems to be "the management", but the management is hired help -- hired by the owners).  Einhorn is putting his proposal before the board, who can put it up for a proxy vote, when the OWNERS can decide.


     


    As for Einhorn himself, he is a very smart guy, who has held Apple stock for a long time (since 2010, I believe, feel free to ask Google), and has made a lot of money for his investors with this holding, despite the bath he has been taking on his position lately. Unlike some of the other money managers he has continued to have faith in Apple, and has held on to his position (apparently you are holding this against him -- good thing he does not care what you think).

  • Reply 69 of 81
    igrivigriv Posts: 1,177member


    Originally Posted by popnfresh View Post

    Apple doesn't control Wall Street. The decline of AAPL is unsupportable given Apple's balance sheet, plain and simple. But as any savvy investor can tell you, market psychology is what counts the most in terms of explaining the rise or fall of a particular stock. There's nothing that AAPL can do in the short term to change this. The only reason that Apple has been as successful as they are and has as much cash on-hand as they do is because of innovation.



    Being an investor carries with it a responsibility to stay on top of market trends. This is true with any equity, not just AAPL. Taking a big loss on AAPL is inexcusable considering that the decline is not something that happened overnight. AAPL has been falling for months. If anyone was caught sleeping at the wheel all this time, it's their own fault.


     


    Apple can do a lot in the short and the long term, but they have a competent management team, which should prioritize. The shareholders own the company, however, and they can make it clear to the management (via the board, which represents the owners) where the priorities should lie, while the management has a responsibility to explain the strategy it is pursuing.


     


    Suppose you buy stock which you believe [through deep understanding of the business] to be worth $10 a share, and you pay (say) $8 a share. The stocks then falls to $7. Do you sell, or do you see this as an even better deal now, and buy more, or at least hold your position. Einhorn has done the latter, as have a number of other people [many of them contributors to AI]. Your solution would be to sell low, and wait until the stock was back at $8 to buy back. "Sell low, buy high" -- a strategy which works for no one but is used by many (including you).

  • Reply 70 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by iPilya View Post



    I wonder.... how low does APPL need to go before $130 billion can be used to take the company private?


     


    The answer is: what is the question? My point was that Apple's cash hoard would make it easier for them to borrow the $500bn they would need to take the company private. The would have a lot of debt, but if they continue to generate money at the rate they are, they would be free and clear in fifteen years.

  • Reply 71 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by Rayz View Post





    Every major piece of software in existence has its share of bugs.


     


    But few software vendors have Apple's resources.

  • Reply 72 of 81
    igriv wrote: »
    That's the stupidest thing I had heard in a long time. Apple can do a lot in the short and the long term, but they have a competent management team, which should prioritize. The shareholders own the company, however, and they can make it clear to the management (via the board, which represents the owners) where the priorities should lie, while the management has a responsibility to explain the strategy it is pursuing.

    The second paragraph is too moronic to respond to, but I will try. Suppose you buy stock which you believe [through deep understanding of the business] to be worth $10 a share, and you pay (say) $8 a share. The stocks then falls to $7. Do you sell, or do you see this as an even better deal now, and buy more, or at least hold your position. Einhorn has done the latter, as have a number of other people [many of them contributors to AI]. Your solution would be to sell low, and wait until the stock was back at $8 to buy back. "Sell low, buy high" -- a strategy which works for no one but is used by many (including you).

    It's obvious you're not an investor. You're just a troll. That is not my "solution", nor did my post infer it would be. I'm not going to dignify with an explanation the ad hominem rants of some adolescent who is only here to engage in a flamewar, but in the future I would advise you to keep your insults to yourself.
  • Reply 73 of 81

    Quote:

    Originally Posted by anonymouse View Post


    Actually, no, the house can't be a corporation, although it can be owned by one. The point to that question was that you didn't have a valid analogy. The point about corporations is that they own themselves, the stockholders simply own stock issued by the corporation, not the corporation itself.



    Absolutely not (I am restricting myself to the US, here). Shareholders are the owners, but they delegate the day-to-day running of the business to their agents, namely managers.


     


    Stay with me here.


     


    In the US system, the officers of the corporation are accountable to the Board, and the Board, in turn, has the fiduciary obligation to oversee the affairs of the corporation using shareholder value maximization as the sole criterion (unless, of course, you are a 'B' corporation -- of which there are not many). This is all well-understood ever since the classic work of Berle and Means (The Modern Corporation and Private Property, 1932) and numerous subsequent court decisions.


     


    This distinction between owners and managers, in turn, creates a massive problem commonly referred to as an 'agency problem'. What this separation of ownership and control creates is the incentive for agents (managers) to screw over the 'principals' (owners). A great deal of corporate law, regulation, and disclosure is all about attempts to mitigate this agency problem (not always successfully, however).


     


    Consider non-pubic corporations (e.g., the S-Corp). Surely, you would agree that equityholders are quite obviously the owners of such 'corporations'? There is conceptually no difference between an S-Corp and a public corporation in terms of who the owners are, except that, with the latter, ownership is dispersed, ownership rights trade on stock exchanges, and public corporations have more detailed reporting/disclosure requirements.

  • Reply 74 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by popnfresh View Post





    It's obvious you're not an investor. You're just a troll. That is not my "solution", nor did my post infer it would be. I'm not going to dignify with an explanation the ad hominem rants of some adolescent who is only here to engage in a flamewar, but in the future I would advise you to keep your insults to yourself.


     


    Ad hominem? Infer? You know some foreign words (congrats!), but sadly not their meaning. I have no interest in a flamewar. You are insulting David Einhorn, who has never done you any harm, as far as I know, without understanding anything about finance. Yes, right, I am a troll, and you are the ghost of Steve Jobs past.

  • Reply 75 of 81


    Corporations, including AAPL are less concerned with their trading value than their corporate valuation, and it is not the company that sets their trading value, it is the market. Knowing that then we must understand that the only influence the company can do is to create the very best in product and service that is possible. The rest is all fluff, so this lawsuit is nonsense because in providing preferred shares to owners of their shares means that the company actually loses valuation since it is eroded because giving it away does not benefit the value of the company, only the shareholder. Is that a bad thing? Not for the shareholder, like this greedy bastard. And to be perfectly honest I'd love it but then i'd be fighting the long-term value of AAPL shares, which would not benefit me unless I was only concerned with the short term. I am a long-term holder, so I am totally opposed to the idea of giving corporate money to those whose only interest is to dry up AAPL share valuation for a momentary gain. 


     


    Apple is clearly a remarkable company, let them do their best and if you own shares, hang on for the ride as it will provide all of us stock holders with gain as the public continues to believe in and purchase their products and services. As for the lawsuit, its a bunch of nonsense.

  • Reply 76 of 81
    jragostajragosta Posts: 10,473member
    Absolutely not (I am restricting myself to the US, here). Shareholders are the owners, but they delegate the day-to-day running of the business to their agents, namely managers.

    Stay with me here.

    In the US system, the officers of the corporation are accountable to the Board, and the Board, in turn, has the fiduciary obligation to oversee the affairs of the corporation using shareholder value maximization as the sole criterion (unless, of course, you are a 'B' corporation -- of which there are not many). This is all well-understood ever since the classic work of Berle and Means (The Modern Corporation and Private Property, 1932) and numerous subsequent court decisions.

    This distinction between owners and managers, in turn, creates a massive problem commonly referred to as an 'agency problem'. What this separation of ownership and control creates is the incentive for agents (managers) to screw over the 'principals' (owners). A great deal of corporate law, regulation, and disclosure is all about attempts to mitigate this agency problem (not always successfully, however).

    Consider non-pubic corporations (e.g., the S-Corp). Surely, you would agree that equityholders are quite obviously the owners of such 'corporations'? There is conceptually no difference between an S-Corp and a public corporation in terms of who the owners are, except that, with the latter, ownership is dispersed, ownership rights trade on stock exchanges, and public corporations have more detailed reporting/disclosure requirements.

    Only one problem with all of that. The Supreme Court has ruled otherwise.

    First, the shareholders do not own the company in a traditional sense. They own specific rights granted to them proportionate to the share of stock they own, but that's not quite the same things. Someone else posted the Supreme Court decision a while ago.

    In addition, the Board does not have a fiduciary responsibility to increase share value, nor do they have a legal responsibility to the shareholder. The same decision says that their responsibility is to the company. In one simple example, if they have to choose between the long term survival and health of the company vs increasing shareholder value in the short term, they are supposed to choose the former. As another example, there are plenty of examples where the board rejected a takeover offer - even one that was significantly higher than the current share price. If the board determines that it's in the company's interest to stay independent, they are free to vote that way - even if the shareholders feel otherwise.

    I used to believe that the Board has a responsibility to the shareholders, as well, but the Supreme Court case that was cited here convinced me otherwise.

    Granted, in 99% of cases, what is good for the company is good for the shareholders, but not 100%.
  • Reply 77 of 81
    robmrobm Posts: 1,068member

    Quote:

    Originally Posted by igriv View Post


     


    The answer is: what is the question? My point was that Apple's cash hoard would make it easier for them to borrow the $500bn they would need to take the company private. The would have a lot of debt, but if they continue to generate money at the rate they are, they would be free and clear in fifteen years.



    Man, you are off the freakn planet.


    Why why in the world would Apple ever want to borrow that amount of money when it doesnt have to and put itself at risk. Crazy.


    With the reserves that they have today never mind the future - phhht that's asylum talk.


     


    You must be in the markets - not in the real world..

  • Reply 78 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by RobM View Post


    Man, you are off the freakn planet.


    Why why in the world would Apple ever want to borrow that amount of money when it doesnt have to and put itself at risk. Crazy.


    With the reserves that they have today never mind the future - phhht that's asylum talk.


     


    You must be in the markets - not in the real world..



    I am not saying that Apple has to go private, only that they could if they wanted to. I thought the NZ school system was pretty good, but apparently reading comprehension is not a required subject there...

  • Reply 79 of 81
    robmrobm Posts: 1,068member


    Oh, I can read and thanks for your concern about NZs education system.


    I think we can safely dismiss your notion that Apple could borrow to go private and say, Apple will never borrow to go private. That would be completely irresponsible of the BoD to put the company at risk.


     


    Champion Einhorn all you want - I think it's a smokescreen and the reality would turn out to be that control of the iPrefs would end up in the hands of a few. Does that benefit Apple ? At the end of the day it would be just another market to trade in. Another market indicator that Wall St can point to and manipulate. Sure a few would benefit short term. Long term for Apple, meh who knows ?


    Does Apple need to do this ?


    I say, No, it's not needed.


    I think we can agree to disagree.

  • Reply 80 of 81
    igrivigriv Posts: 1,177member

    Quote:

    Originally Posted by RobM View Post


    Oh, I can read and thanks for your concern about NZs education system.


    I think we can safely dismiss your notion that Apple could borrow to go private and say, Apple will never borrow to go private. That would be completely irresponsible of the BoD to put the company at risk.


     


    Champion Einhorn all you want - I think it's a smokescreen and the reality would turn out to be that control of the iPrefs would end up in the hands of a few. Does that benefit Apple ? At the end of the day it would be just another market to trade in. Another market indicator that Wall St can point to and manipulate. Sure a few would benefit short term. Long term for Apple, meh who knows ?


    Does Apple need to do this ?


    I say, No, it's not needed.


    I think we can agree to disagree.



     


    We can certainly agree to disagree, but what are we disagreeing on? I am not saying that Apple either should or will go private (as you point out, there are downisdes to going private, but there are also upsides -- being a public company in the US is a huge pain, and getting huger by the minute, plus you have to deal with pesky shareholders, like Einhorn).


     


    As for championing Einhorn, why is "control of the iPrefs" an issue? It's just a bond, which carries no voting rights, and given Apple's sterling credit rating would yield about the same as treasuries almost immediately.  As I have said in other posts, the problem is not the iPrefs, but the fact that the Apple management has not made any clear statement of what they intend to do with the money, and (I am repeating myself again...) keeping that much money under your mattress is very expensive: its value gets eroded by inflation,, and I am pretty sure that I could invest it for meaningful yield if Apple gave me my share (as a shareholder).  Notice that as a shareholder it is MY RIGHT to ask the management why this expense is necessary, and it is MY RIGHT to sue them for breach of fiduciary responsibility if they don't have a good answer. Einhorn is exercising his rights, and his proposal is reasonable. If the board turns it down (quite possible), they better have a well-reasoned statement to back up their decision.

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