Judge gives Einhorn victory over Apple
A federal judge on Friday handed hedge fund manager David Einhorn a victory over Apple, blocking the Silicon Valley company from proceeding with a shareholder vote on a controversial proposal that would limit the company’s ability to issue preferred stock.
U.S. District Judge Richard Sullivan in New York granted a motion by Einhorn’s Greenlight Capital for a preliminary injunction stopping the vote on that proposal. The vote was scheduled for Feb. 27 as part of Apple’s annual shareholders’ meeting.
Sullivan said Apple was wrong to bundle four amendments to its corporate charter into one proposal for a vote at next Wednesday’s annual meeting. Shareholders should get to vote on the amendments separately, he said.
Greenlight Capital, Einhorn’s hedge fund, sued Apple over the proposal because it would remove the board’s ability to issue preferred stock without shareholder authorization. Einhorn wants Apple to issue “iPrefs,” preferred shares with a guaranteed dividend, as a way of committing the company to sharing some of its cash hoard with shareholders.
Einhorn has been trying to rally Wall Street to vote against the Apple proposal as a way of showing their displeasure with the company’s capital-allocation policies.
Apple has $137 billion in the bank, an unheard-of sum that grows by about $40 billion every year. Investors almost universally want Apple to hand out at least some of that cash, but Einhorn hasn’t gotten much support for his “iPrefs” idea or his “No on Proposal 2” campaign.
Apple and Greenlight didn’t immediately respond to requests for comment Friday.
Last week, Apple CEO Tim Cook said the company’s proposal puts more power in the hands of shareholders, making it difficult to understand why a shareholder would fight it. Calling Greenlight’s campaign a waste of time, Cook said Apple wouldn’t squander money by mailing letters to shareholders to persuade them to vote for the proposal.
The California Public Employees’ Retirement System, the country’s largest pension fund, had said it would vote for Apple’s proposal, because it would have strengthened shareholder rights. Among other measures, it would let shareholders vote against directors.