Greenlight pushes Apple to offer 'iPref' preferred shares

Posted:
in AAPL Investors edited January 2014
Ahead of Apple's annual shareholder meeting, Greenlight Capital presented its sales pitch to investors for Apple to offer preferred stock shares ? or, as hedge fund manager David Einhorn referred to them, "iPrefs."

iPrefs


With Apple's massive cash hoard now at $137 billion and growing, Einhorn and Greenlight hope to get shareholders behind their plan, which they believe will unlock value for investors. Einhorn believes Apple's iPref program could start small, and distribute one preferred stock share for each common share to existing investors.

Under Einhorn's plan, Apple's so-called iPrefs would pay out a dividend of 50 cents per quarter, or $2 per year. Over time, he believes Apple could grow the program to offer a total of five iPrefs per share of common stock.

At five iPrefs per single common share, Apple's preferred stock would double the current dividend offered by Apple.

iPrefs


Einhorn, in a conference call with investors and the media on Thursday, said he understands that Apple plans to be disciplined with its cash. He believes his iPref concept would make that promise to investors explicit. His hedge fund has been an investor in AAPL stock since 2010.

Distributing iPrefs to existing shareholders would reduce the share price of the common stock. But Einhorn believes the combined value of common stock and iPrefs could be considerably greater than the company's current share price, unlocking value and bringing in new investors.

In his calculations, iPrefs could unlock $61 per share more than the next best alternatives, which in his view would be a one-time share repurchase or a special dividend.

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.

iPrefs


The Greenlight Capital proposal suggests that iPrefs would appeal to individual savers, bringing in new types of investors such as insurance companies, pension funds, and institutional fixed income funds.

While Einhorn's ideal projections call for five iPrefs to eventually be distributed per one common share, he believes Apple should start slow with just one iPref per share. Those preferred shares would be given for free to existing shareholders, but iPrefs could be sold on the market and would have a value of about $50 each.

By starting small, Apple would allow the market time to adjust and determine the fair open price for an iPref share.

Starting at one iPref per share, Einhorn predicts that Apple's common stock price would drop from $450 to $430. But when the value of a $50 iPref is included, the total value to shareholders would be $480, or $30 more than the current common stock share price.

iPrefs


Einhorn believes his iPref concept would allow Apple to keep the bulk of its cash hoard overseas without needing to repatriate it and pay a tax rate north of 30 percent. It also leaves Apple with the ability to do what it does best with its money while returning some value to investors, he said.

"We don't know what Apple's plans are, but iPrefs don't interfere with Apple's using the existing cash hoard," Einhorn said Thursday.

Greenlight's proposal was presented to Apple last year, but the concept was rejected by Chief Financial Officer Peter Oppenheimer, Einhorn said. But now in the last week, Apple Chief Executive Tim Cook has reportedly called Greenlight's plan "creative," and indicated his company will consider it.

The hedge fund manager is also suing Apple over the company's so-called "Prop 2" proposal, which would revoke the ability of Apple's board members to issue preferred stock, instead putting that power into the hands of shareholders.

Calling Apple a "leader in innovation," Einhorn said he believes the company could blaze a new trail by adopting his iPref plan, working with investors in an outside-the-box manner that consumers already associate with the company's products.

"It's not complicated, it's merely unfamiliar," he said. "It's also simple and innovative."
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Comments

  • Reply 1 of 50


    Dude thinks he himself runs Apple. He and his ilk are what's ailing my Apple stock.

  • Reply 2 of 50
    Sounds like a pain. I'd rather Apple just buy back stock so those of us who are long continue to benefit.
  • Reply 3 of 50
    How about preferred shares for everyone who has held AAPL for 10 years or longer? That would put him right out of commission since he's a short termer.
  • Reply 4 of 50
    gwmacgwmac Posts: 1,807member
    I agree, time for a major repurchase by Apple for us long investors. Stock is cheap now and getting lower so I hope they make a big move soon.
  • Reply 5 of 50


    "...His hedge fund has been an investor in AAPL stock since 2010."


     


    Ah, one of the long-time/long-term faithful then!

  • Reply 6 of 50
    solipsismxsolipsismx Posts: 19,566member
    I thought I couldn't dislike Einhorn anymore than I already do but iPrefs takes it to a [I]whole… 'notha…level[/I].
  • Reply 7 of 50

    Quote:

    Originally Posted by Fotoformat View Post


    "...His hedge fund has been an investor in AAPL stock since 2010."


     


    Ah, one of the long-time/long-term faithful then!



     


    That's why there should be no preferential treatment for known jagweeds like Einhorn.

  • Reply 8 of 50


    For the average stock holder this would not be good. This would only benefit hedge fund managers. This guys a crook, I would not trust him. Hopefully Apple will keep ignoring him.

  • Reply 9 of 50
    Total Wall Street hogwash. This sounds like nothing more than a form of Greenmail, and a plan for financiers to generate fees. "Unlock $61 per share more value." This is totally hypothetical, and no guarantee that it will positively impact the actual stock price. As a shareholder, I'll pass. I'd rather AAPL just increase their buyback program. These guys don't care about Apple, or their products. They just want something to brag about to the guys at the club while they do lines of cocaine off of the strippers breasts.
  • Reply 10 of 50
    jragostajragosta Posts: 10,473member
    kozchris wrote: »
    Sounds like a pain. I'd rather Apple just buy back stock so those of us who are long continue to benefit.

    That's certainly one option - and something they should be doing at the current share price.

    However, even if they want to distribute the money by dividends, there are better ways than this lame scheme. Simply increasing the dividend by $0.50 per share is far easier to do than issuing preferred shares that pay a $0.50 dividend - and far less confusing.
  • Reply 11 of 50


    Think about where the cash is.  This is a global economy.


    By doing this, Apple will lose money to taxes or have no money to function in the States:


    http://www.fool.com/investing/general/2011/02/22/why-apple-isnt-paying-a-dividend.aspx

  • Reply 12 of 50
    Utter BS and as a long term AAPL owner will vote down on these. Now that Apple has a cash pile they want to walk in and drink the milk shake and walk away. They milked it for all the growth (they) could imagine, now they want the cash. They know its not good for investors like myself who have owned Apple longer and continue to own it longer than Einhorn. That's why they don't want it to come to a share holder vote. This is an attempt at extortion to arm twist Apple's board to issue these preferred shares at the expense of the majority of owners.

    iPref Einhorn GO-Up and Eff himself
  • Reply 13 of 50
    mac_dogmac_dog Posts: 1,069member


    if steve were alive, he'd rip this guy such a huge new asshole. too bad tim isn't mouthy when apple needs it.

  • Reply 14 of 50


    This Einhorn guy probably believes that by calling it 'iPrefs' he's being just as creative as Steve Jobs used to be. Looking at the design of the presentation, however, it's obvious what it's all about: Greed, greed, greed. And the name 'Einhorn' creeps me out as much as Goldman Sachs' Blankfein does as well. Are there any hedge funds that don't behave like swarm of locusts? 


     


    (*corrected spelling of Blankfein)

  • Reply 15 of 50

    Quote:

    Originally Posted by macanoid(TM) View Post


    This Einhorn guy probably believes that by calling it 'iPrefs' he's being just as creative as Steve Jobs used to be. Looking at the design of the presentation, however, it's obvious what it's all about: Greed, greed, greed. And the name 'Einhorn' creeps me out as much as Goldman Sachs' Blanfein does as well. Are there any hedge funds that don't behave like swarm of locusts? 



     


    "iPrefs" is just as tasteless and crass as Einhorn himself. What a world-class dingleberry.

  • Reply 16 of 50
    Apple stock = iFizzle. They need to stop talking about Apple's 'value'. This company's value is an embarrassment to any shareholder. Google headed towards $1000. Apple headed towards $400. Forget it. Apple better learn to cook it's books or something before the value reaches zero.
  • Reply 17 of 50


    Originally Posted by Constable Odo View Post

    This company's value is an embarrassment to any shareholder.


     


    That you think stock price is reflective of actual value is an embarrassment.

  • Reply 18 of 50
    elrothelroth Posts: 1,201member
    The reason he came up with this (instead of a buyback or just increasing the dividend) is to get around the tax issue on funds held in foreign countries. Whether it would actually do that, I have no idea. I'm not impressed with this plan overall.
  • Reply 19 of 50

    Quote:

    Originally Posted by Constable Odo View Post



    Apple stock = iFizzle. They need to stop talking about Apple's 'value'. This company's value is an embarrassment to any shareholder. Google headed towards $1000. Apple headed towards $400. Forget it. Apple better learn to cook it's books or something before the value reaches zero.


    You have no idea of what you speak. That you speak of share price proved your a fool. In fact, your entire post is idiotic babble with a childs understanding of Wall Street and investing.

  • Reply 20 of 50
    Is this Einhorn guy Gordon Gekko or what? I can't tell! I don't trust him!



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