February 12, 2013
Apple CEO Voices Support for Issuing More Preferred Stock, But Only With Shareholder Approval
Apple CEO Tim Cook is describing the recent lawsuit filed by Greenlight Capital founder and hedge fund manager David Einhorn as nothing more than a “silly sideshow.”
Einhorn is suing Apple in a bid to convince the company to distribute more of its $137 billion stockpile — one of the largest among technology companies — to investors. Einhorn, whose company Greenlight holds 1.3 million Apple shares, is challenging “Proposal 2” in Apple’s proxy statement, which would eradicate the board’s ability to issue preferred stock without gaining shareholder approval.
Preferred stock, traditionally, is known to have drawbacks such as coming without voting rights and having less potential for appreciation.
While Cook said Apple’s board of directors is mulling over Einhorn’s request for the firm to distribute preferred stock and restore more cash to investors, he seemed impatient, both with the lawsuit and Einhorn promoting his legal activities in the press.
“This is a waste of shareholder money and a distraction, and not a seminal issue for Apple,” Cook said while speaking at Goldman Sachs’ annual technology industry conference in San Francisco today (Feb. 12). “That said, I support Prop 2. I am personally going to vote for it.”
Cook added that he found it “bizarre that we would find ourselves being sued for doing something good for shareholders.”
Apple will not issue preferred stock without receiving the nod from shareholders, Cook said, no matter the outcome of the lawsuit.
“We would clearly go for a vote, whether our charter requires it or not,” Cook said.
By early 2012, Apple had built its cash balance to a point beyond what was needed to run the business and “maintain flexibility to take advantage of strategic opportunities,” Apple said in a press release.
At that time, the firm announced a plan to return $45 billion to shareholders over three years. As of next week, $10 billion will have been returned to investors.
Apple’s shares have plummeted from a record high of more than $700 last year to $467 due to investor skepticism about the company’s ability to keep up with its competition, particularly Samsung.