Einhorn Gives Apple Team a Barely Passing Grade

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Greenlight Capital’s (NASDAQ:GLRE) David Einhorn shared his thoughts on Apple’s (NASDAQ:AAPL) capital management strategy during a recent conversation with CNBC’s Scott Wapner on the “Fast Money Halftime Report” show. Earlier this year, Einhorn attempted to force Apple to release some of its stockpiled cash to investors. The activist investor proposed that Apple issue permanent preferred shares that he dubbed “iPrefs.” These so-called “iPrefs” would have a value of $50 and pay a perpetual dividend of $2 every year.

Einhorn later won an injunction against the company when it attempted to add an amendment to its articles of incorporation that would have required a shareholder vote to approve the issuance of preferred shares. Although Apple never issued “iPrefs,” Einhorn noted that the iPhone maker eventually implemented a $100 billion share buyback program over three years.

“I think that moves Apple’s capital management from a ‘D minus’ to a ‘C plus’ or something like that,” Einhorn told Wapner. “So obviously, more could be done that could probably unlock even more value, but it’s not so bad at this point that I really want to complain about it.”

CNBC’s Wapner also asked Einhorn about his opinion on Carl Icahn’s recent efforts to expand Apple’s share buyback program even further. “I think there is a school of people that really think that shareholders should be quiet and if they don’t like what’s going on, they should simply sell their shares,” noted Einhorn.

However, Einhorn refused to offer an opinion on Icahn’s share buyback proposal. “Carl’s view is not particularly important to mine because I really don’t know what he’s thinking and I really have to form my own view,” stated the Greenlight Capital co-founder. Icahn recently wrote an open letter to CEO Tim Cook that proposed expanding Apple’s share buyback program by $150 billion by borrowing funds at a 3 percent interest rate.

On the other hand, Einhorn was happy to offer his opinion on Apple’s overall performance. “I look at it as a company that really has dominant positions in growing markets,” observed the hedge fund manager. He noted that Apple is different from Motorola or BlackBerry (NASDAQ:BBRY) because of its “software component that makes it a recurring sale. If you buy the last iPhone, you’re very likely to buy the next iPhone.” Finally, Einhorn revealed that he owns an iPhone 5S and he thinks it is “terrific.” The investor also said he is “still long” on Apple.

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