Are Apple Investors on Einhorn’s Side?
Apple (NASDAQ:AAPL) has announced its management is in talks to return cash to shareholders, a demand that Greenlight Capital fund made earlier on Thursday. Greenlight, led by manager David Einhorn, also filed a lawsuit against the company in an attempt to stop it from getting shareholder clearance of a proposal to eliminate preferred stock. Apple tried to stress through its statement that the proposal, up for voting in its annual meeting on February 27, was only to give shareholders a right to refuse issuing preferred stock.
But other investors in the cash-rich company stood up for Einhorn, saying they agreed with his demand and that Apple needed to do more to appease shareholders. Offering preferred shares with a higher dividend would ease investors’ concerns about Apple’s slowing revenue growth and shrinking margins, Victory Capital Management’s Erick Maronak told Bloomberg. It would also attract a new class of value investors to replace the growth-focused shareholders who have exited the stock in recent months.
“I agree with him that Apple needs to distribute some of that cash, and I think most investors do,” Maronak said. “Value investors would have a hard time not buying it,” he added. Maronak, whose firm owns 370,000 Apple shares, also wouldn’t mind it if Apple were to increase the dividend on its common shares, adding that such an option may be more straightforward to pull off.
Egan-Jones Proxy Services, which advises institutional shareholders, has recommended shareholders vote against Apple’s proposal during the meeting. However, the iPhone maker is backed by the large California Public Employees’ Retirement System, which owns 2.35 million Apple shares. CalPERS has been trying to convince more investors to back Apple during the vote.
Capital Advisors’ Keith Goddard said he planned to vote against the proposal. “I’m in agreement with the concept that Apple has way too much cash,” Goddard told Bloomberg. Capital Advisors owns 22,925 Apple shares. “As shareholders, our interests are not being served by having 25 percent of the company’s value sitting on the sidelines,” he added.
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