A Second Lawsuit Comes to Bite Apple
Chief executive Tim Cook may consider Greenlight Capital’s lawsuit against Apple (NASDAQ:AAPL) nothing more than an unnecessary distraction, but it appears the company will have to deal with two of those in the run-up to its annual meeting on February 27.
A second investor filed a lawsuit against the iPhone maker on Wednesday, citing concerns similar to those mentioned by David Einhorn’s Greenlight hedge fund. Brian Gralnick of Elkins Park, Pennsylvania, who has been an Apple shareholder since 2007, filed the suit with the U.S. District Court in New York in an attempt to block the company from voting on two proposals at its meeting.
The first part of Gralnick’s filing mentioned the same proposal that Einhorn has targeted — regarding the imposition of restrictions on Apple’s ability to issue preferred stock. The second proposal, meanwhile, was related to an advisory “say-on-pay” vote on Apple’s executive compensation. In his filing, the investor alleged that Apple had failed to disclose details of how it determined top executives’ pay. Court papers did not list the size of Gralnick’s stake in the company.
Arnold Gershon, a lawyer for Gralnick, told Reuters the investor will try and be heard during the scheduled February 19 hearing of Einhorn’s lawsuit. “The case has some overlap with the Einhorn case, but it is a broader case,” Gershon said.
Greenlight Capital filed a case against Apple in the same court last week after alleging that the company’s bundling of three proposals — including the one on preferred stock — violated a U.S. Securities and Exchange Commission rule. However, Einhorn’s bigger concern is regarding Apple’s dividend and stock buyback practices. According to the hedge fund manager, with $137 billion in cash holdings, Apple needed to do more to share its bounty with its investors.
Speaking at the Goldman Sachs tech conference on Tuesday, Apple chief executive Cook said that while the board was considering Einhorn’s proposal, the court case was “a silly sideshow.”
Cook added that he was set to vote in favor of the preferred stock proposal at the meeting because he believed it had been designed for shareholders’ benefit. “I find it bizarre we find ourselves being sued for doing something that’s good for shareholders,” Cook said.