David Einhorn, president of hedge fund Greenlight Capital Inc. (NASDAQ:GLRE), thinks Apple (NASDAQ:AAPL) is sitting on too much cash. “The combination of Apple’s low (and shrinking) price-to-earnings multiple and $137 billion (and growing) hoard of cash on the balance sheet supports Greenlight’s contention that Apple has an obligation to examine all options to create and unlock additional value,” he explains.
The firm announced Thursday that it is suing the company over a proposal that would essentially eliminate preferred stock. This was conveniently bundled with two other shareholder-friendly measures — a sneaky way to force shareholders to accept or reject all three at once, which according to Greenlight, violates a U.S. Securities and Exchange Commission rule. Einhorn urges investors to demand from Apple a “perpetual preferred stock” that carries a 4 percent dividend, thus unlocking hundreds of dollars of value per share.
“We don’t know what’s really going on,” says Jim Cramer. “One of the things that Einhorn says is that they’ve got a depression mentality. He does make a very good point, which is that if they were to return more capital to shareholders, the stock would be higher. I come back and say, had they executed properly the stock would be higher.”