Apple fires back at investor in cash dispute

Apple fires back at investor in cash dispute

Summary: The Cupertino, Calif.-based technology company has hinted that it may speed up cash returns to its shareholders in the future, after an investor sued the company after it floated the elimination of preferred stock.

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Apple has fired back at an investor who brought a lawsuit against the company, following the company's plans to issue preferred stock instead of dishing out cash to shareholders. 

In a statement, the firm said it is in "active discussions about returning additional cash to shareholders," and would continue to "evaluate" proposals that would see investors issued some form of preferred stock.

In Apple's latest proxy statement filed with the U.S. Securities and Exchange Commission, plans were introduced to get rid of "blank check preferred stock". Not a big deal to the rest of us mere mortal users of Apple products, but rather a big thing for investors who pump millions into the company's coffers. 

Apple investor and Greenlight Capital hedge fund manager David Einhorn came up with a novel solution. Write to Apple shareholders and ask them to vote against a proposal by Apple that would allow the company to issue stock that paid dividends.

Speaking to CNBC, Einhorn even managed to get in a "grandma" pot-shot at the company he invests in, likening the company to his "cash hoarding" grandmother. 

He said: "Apple has sort of a mentality of a depression. In other words, people who have gone through traumas—and Apple's gone through a couple traumas in its history—they sometimes feel they can never have enough cash."

Einhorn also filed a suit in a New York court seeking an injunction preventing Apple from throwing in that nugget with other items. Instead, he wants it to be voted on individually by shareholders.

Apple has more than $100 billion in the bank—in various countries around the world—and remains one of the largest and most profitable technology companies around. Apple chief executive Tim Cook first issued a dividend, both as company leader and for the first time in the company's history, in August 2012.

Since then, there have been two more dividends of $2.65 per share, and the company is on track to return $45 billion over the next three years. So far, Apple will have returned $10 billion to investors by this time next week.

But Apple wants to hold onto that cash balance rather than return cash to investors. Today, in a statement, the company hinted that it may increase or speed up cash returns to Apple stock owners.

The Cupertino, Calif.-based maker of shiny rectangles—now in incremental inch sizes—issued a statement earlier today saying it would "thoroughly evaluate" Greenlight Capital's proposals, but the company is promising nothing.

Apple said in a statement:

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.

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. 

The company hasn't promised anything, nor is it reversing its plans. The key takeaway is that Apple is open to talk about stock options. 

Apple received a nice bump to its share price at the end of the day, rising by just shy of 3 percent to $468 per share at market close, but fell slightly in after-hours trading.

(Credit: Google Finance)

Topic: Apple

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  • This is why companies like Dell went private

    Serve customer's and a company's long term interest, over investors short term intrests.
    NoMore MicrosoftEver
  • Remember When...

    Poor Apple run by accountants now. Apple insiders now reminisce and say "remember the good old days when we used to create new products..."
    Sean Foley
  • Correction:

    "...investors who pump millions into the company's coffers. "

    Buying stock in a company after the IPO does not pump any money into the company's coffers.
    • Re: Buying stock in a company after the IPO does not pump any money into th

      Rather misleading thing to say, don't you think?
      • It's a rather common misunderstanding of the stock market.

        When someone buys shares of stock on the market, they are buying shares that others are selling. The stock traders on the floor match buyers with sellers. Unless the company is selling additional shares of stock (most retain some - that's the 'diluted' vs the 'undiluted' numbers in the earnings per share reports), the purchaser's money goes to the seller, not the company.

        It's like the used car market: Go to a lot and buy a used Ford. The previous owner got money, you pay money, the dealer takes a cut, and Ford gets nothing. The stock market is no different.