Apple (AAPL) responds to hedge fund proposal for dividend yielding preferred stock, but expect the proposal to remove preferred stock from Apple corporate charter to proceed.
After Greenlight Capital and David Einhorn fired a broadside against Apple’s cash allocation practices and proposal to remove its ability to issue preferred stock, Apple felt the need to respond.
Einhorn has been talking to Apple about sending cash back to shareholders via a preferred stock:
“We believe Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders,” said David Einhorn, President of Greenlight. “Over the past several months, we have had an ongoing dialogue with Apple regarding one option to do so, namely the creation of a new security, a perpetual preferred stock that would be distributed at no cost to Apple’s existing shareholders, and would provide an attractive, sustainable dividend while preserving Apple’s financial resources to pursue its business strategy.”
Apple’s proxy statement for its upcoming annual meeting asks the shareholders to approve changes to its charter, including the removal of the ability to issue preferred stock. Apple now says that:
- It was not done in response to Greenlight’s proposals
- They can still issue preferred stock, but would have to ask shareholders first
Specifically, Apple said:
“If [the amendment to the charter removing preferred stock] is adopted, our shareholders would have the right to approve the issuance of preferred stock.”
Sort of, but. . . It is not so much that they would have the right as much as their approval would be required before the company could re-amend the charter to authorize the issuance of preferred stock. In other words, the board could not issue the preferred stock (whatever the terms) without shareholder approval.
This is why CalPERS likes it. However, since Apple’s hands would be tied, Einhorn does not like it. But don’t fret,
“We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.”
How would Bruce Willis respond to such a response? “Let’s see you take this under advisement, Jerkweed.”
This is the first instance of “Jerkweed” as a Tag. A party may be in order. Thanks, Bruce!