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More on Einhorn and Apple (AAPL): The company needs to use the same level of creativity with its...

More on Einhorn and Apple (AAPL): The company needs to use the same level of creativity with its balance sheet as it does to produce products, writes Einhorn. Every $50B of perpetual preferred stock distributed would unlock about $32/share of value, he says, and Apple has the capacity to distribute several hundred billion. "Greenlight is alarmed that Apple is attempting to eliminate preferred stock from its corporate charter." Shares  +0.7% premarket.
Comments (49)
  • greenhorn is an retard, having less preffered stock would make common stock more valueable
    7 Feb 2013, 08:52 AM Reply Like
  • "greenhorn is an [sic] retard, having less preffered [sic] stock would make common stock more valueable [sic] "


    Someone who can't function in the Mother Tongue shouldn't try to call someone else a retard.


    Are you talking about book value or the stock price? I doubt you know.
    7 Feb 2013, 09:04 AM Reply Like
  • Thank you for this comment.
    7 Feb 2013, 09:16 AM Reply Like
  • Even if they succeed in blocking Apple's ability to eliminate preferred shares issuance, it is still up to Apple to issue the preferred shares. Up to now they have not done so. Einhorn's ploy will not force Apple to issue the preferred's if they desire not to do so. Just a Hedge Fund manager's scheme to get his name in the news and make a few bucks more on his 1.3 million shares of Apple stock.
    7 Feb 2013, 02:31 PM Reply Like
  • The idea is that the $137B is being discounted by shareholders because it is sitting in a warehouse doing nothing. The preferred stock is a method to realize the cash value without having to actually distribute the cash to shareholders. You get the best of both worlds: shareholders receive value and the cash would still be available to the company for use. Also, contrary to the Einhorn detractors who say this is a cash grab this is a long term scheme. Dividends would be paid out over many years. It is crazy that anyone is against this. It is clearly a win-win situation. There is no downside here.
    8 Feb 2013, 02:51 AM Reply Like
  • Only problem with Einhorn is a bad toupee...reminds me of the Milken era...
    7 Feb 2013, 08:54 AM Reply Like
  • Regardless of the statement's merit,
    the hedge fund bots are going to notice "Einhorn" and "Apple"
    in the same article. I guess we're going to see how
    stable their trigger fingers are at these funds.
    7 Feb 2013, 09:16 AM Reply Like
  • LOL Einhorn really thinks he can take on Apple? Apple has enough cash to spend $6 billion (all of Einhorn's AUM) on lawyers and not even blink.
    7 Feb 2013, 09:25 AM Reply Like
  • My feeling is that AAPL should use their cash to ruin greed ridden wall Street bozo Einhorn and his greasy investors. These hedge fund vampires seem to be threatening to keep shorting AAPL,...but as an AAPL investor, i say, let them short all they want. True LT investors will keep getting increasingly better bargains.


    Make our day.
    7 Feb 2013, 12:12 PM Reply Like
  • Einhorn is not exactly broke. He has enough money to get their attention and even maybe enough to make them pay attention to shareholders.
    8 Feb 2013, 02:51 AM Reply Like
  • He's trying to get AAPL to do something positive with respect to it's current position on it's excess cash horde. it's important to engage management on the issue since they don't seem to care about investors....remember, investors have made them's like pro atheletes and the fans who pay expensive ticket prices so the players can retire wealthy. APPL needs to pay more attention to Wall Street and the stock price. I've heard the "Cookian" mantra about "building the best products" in the world over and over. What has thet done for your portfolio lately?
    7 Feb 2013, 09:36 AM Reply Like
  • Investors haven't made them rich, consumers have and to the extent that "they" created the things that consumer's bought they made themselves rich.


    I invest, but I acknowledge its essentially a non-creative activity. You bet on horses. You don't train them; you don't ride them; you don't breed them. It takes skill to exercise proper judgment, to pick the winners, but the idea that the people involved with the company owe us something because we decided to invest in them is just egoistic. Especially for a company like Apple which is debt-free and flush with cash. If a company were in debt or merger talks, if they were in short using their share price to move their business forward somehow, you'd have a point. Apple just uses revenue from their business.


    I love the capital it gives them the leverage to enter any industry, pursue any venture. And yes it is a safety net. Help our portfolios, a company that gives in to Wall Street sentiment MIGHT be truly in a creative funk. We could just as easily blame Wall Street for not giving Apple a higher multiple since the trade so far below the average multiple. Mr Einhorn could use his power to address that disparity by convincing fellow hedge fund managers of Apple's stability and steady revenue stream. He CHOSE to go after the cash. Why? Pure greed.


    This is a power play for more money and nothing more.
    7 Feb 2013, 10:36 AM Reply Like
  • Applocrat: You obviously don't know how our economic system of raising capital for growing a company works.
    7 Feb 2013, 10:58 AM Reply Like
  • Why would you want Apple to pay attention to "Wall Street" when clearly no one in financial services cares about how to operate a company, they only care about underwriting opportunities and financial transactions. And, yes, they care about stock price, but only to the extent it allows them to do more transactions. Remember that Apple got to where it is by NOT paying attention to "consensus" or market research. Steve Jobs, and apparently Tim Cook is following the lead, said that Apple should lead consumers, not react to their current demands. Apple is "doing its thing" in running the company as best they know how, creating products which lead the industry where they think it should be going, and to hell with what analysts/Wall Street says.
    7 Feb 2013, 11:22 AM Reply Like
  • I didn't see your comment before I posted mine, but we are clearly on the same page. Well stated.
    7 Feb 2013, 11:24 AM Reply Like
  • to the contrary. And in any case, the last thing that Apple needs is more capital!!
    7 Feb 2013, 11:25 AM Reply Like
  • fair enough. I admit to no greater sin than youth. Enlighten me.
    7 Feb 2013, 12:11 PM Reply Like
  • No, AAPL should pay less attention to Wall Street. Their perspective is far too short term. AAPL as a firm and as a LT investment is far better off without typical hedge fund types as investors.


    Einhorn needs to be treated very roughly here.
    7 Feb 2013, 12:16 PM Reply Like
  • Yep, exactly correct.
    7 Feb 2013, 12:17 PM Reply Like
  • I know how it works, perfectly well. And i know how idiot speculators like Eihorn manipulate it for their personal gain, at the expense of real LT investors.
    7 Feb 2013, 12:20 PM Reply Like
  • Applocrat... you own the company and they don't owe you anything... not even a return call, nothing. You better believe they owe you something. If you owned a restaurant and hired a manager, that manager owes you nothing? Wow. I am not a nice (read pushover) owner I guess.
    7 Feb 2013, 02:47 PM Reply Like
  • Applocrat: A company sells shares and goes public for them to raise money to grow the business. Did AAPL need to sell shares to start selling iPods that started their recent growth? No but they would not have been in that position to be able to do that in the first place without their IPO money. In that sense shareholders contributed alongside customers and employees in making AAPL what it is.


    One could make the argument that when a person buys a share of stock from the person that was in the IPO that it does nothing to help but it does. The type of people that like to invest in IPOs make their profit, free up their cash thanks to investors like us, and then move on to the next IPO to help the next company start.


    As for AAPL's cash they may call me greedy but I didnt invest in Apple to be part of some hipster movement. I did it to make money. I agree with Einhorn in that the cash needs to be given to shareholders somehow.
    IF AAPL needs it for operations they should keep it,.
    IF they have a plan for the money for M&A they should keep it.
    Tim Cook has admitted they have no idea what to do with the money. He called Warren Buffett for advice on what to do.
    The money is just sitting there doing absolutely nothing. Give it to the three groups that made AAPL what it is. Higher employee wages, cheaper products for customers, or dividends/share buybacks for investors. Someone should be benefiting from it and nobody is.
    7 Feb 2013, 02:55 PM Reply Like
  • the best way for you to make money is through growing profits I am not saying that you cannot grow revenue and deploy capital to share holders simultaneously, but honestly as a shareholder, if you had to choose a focus for the company wouldn't you prefer that they were focused on the engine of the business?


    Apple made all this money for their shareholders by making daring business moves. Entering into new industries. Cannibalizing their own products when it seemed called for, becoming a serial disruptor. When a company is concerned with protecting shareholder value like a hen guards her eggs, do you really the last few years would have unfolded in the same way?


    And let's be frank. We DON'T OWN THE COMPANY. Yes, I understand the legal convention. Please no flaming on that point, but when I think of something I own, truly own, I imagine exerting day to day control over that thing. If I called Apple and suggested that they delve into quantum computing, would they? Would they even entertain the suggestion if they felt it was a poor one?


    I bought a stake. I am riding the wave. If the wave rises I rise with it, if it falls I fall. I do not control or create the wave.
    7 Feb 2013, 04:59 PM Reply Like
  • "He called Warren Buffett for advice on what to do."


    when did that happen? Tim Cook did this? I believe that was actually Jobs, a couple years before he passed away.
    8 Feb 2013, 10:03 AM Reply Like
  • All AAPl shareholders sick of this ridiculous non-sensical sub $550 area need to pressure AAPL to unlock value by being much more generous with their cash. They have more cash than god right now and can easily afford to double the dividend and a lot more.
    7 Feb 2013, 09:37 AM Reply Like
  • God is spelled with a capitol G.
    7 Feb 2013, 10:16 AM Reply Like
  • I just wrote to AAPL just now telling them of my deep pride, as a LT investor, in their resistence to crass brain dead Wall Street speculators, and their whiny, greed-ridden threats. Screw these vicious little brats. Tell them to take their shyster money and stick it.
    7 Feb 2013, 12:24 PM Reply Like
  • Well that's ironic
    7 Feb 2013, 12:40 PM Reply Like
  • Hank890 that is going to never-never Next time do your research b-4 investing. Cut your losses now so the rest of us can be done with y'all.
    7 Feb 2013, 02:56 PM Reply Like
  • Hank890: Presuming you own shares in AAPL and have an economic stake in this discussion...
    Why exactly did you invest in AAPL if not to make money?
    7 Feb 2013, 02:58 PM Reply Like
  • Why not have a periodic Special $30/share Dividend whenever the Apple share value reaches a certain Dollar Amount? Share the wealth with we Share Holders.....


    That way we shareholders could share in the Apple growth similar to the payments achieved to the Directors such a Al Gore when he recently picked up multiple Millions with his share conversion...
    7 Feb 2013, 10:00 AM Reply Like
  • He is probably just trying to do something to rectify his miscall of AAPL as the first trillion-dollar market cap stock
    7 Feb 2013, 10:11 AM Reply Like
  • When Einhorn speaks markets listen. One Einhorn green mountain presentation did that stock in. That guy knows how to work CNBC better than CNBC .
    7 Feb 2013, 10:46 AM Reply Like
  • The reason a company wants the option of preferred shares is to use it as a "poison pill" against unwanted take-over attempt.
    So to eliminate preferred shares, Apple management must think that it is unnecessary because an unsolicited take-over attempt on the world's largest company is unlikely. Yes, the preferred share will oblige a company to pay perpetual dividend, but a more flexible way is to simply declare dividend on the commons.
    Mr. Einhorn is a short term trader.. Once he made his money, he may even short Apple stocks. He is not acting for shareholders' best interest, don't be fooled.
    7 Feb 2013, 11:16 AM Reply Like
  • People listen because Einhorn knows what he is talking about. He has more investing and market experience in his pinky than most will ever know.
    7 Feb 2013, 11:35 AM Reply Like
  • This is the problem with AAPL and many other companies sitting on wads of offshore cash. If all the value creation (i.e., cash flow) gets directed into foreign tax havens at low reinvestment rates, then the PV for shareholders is diminished. And there is a huge time value / reinvestment issue here that is not being reflected in the usual argument about the after-tax value of AAPl's cash per share. That figure is far too small. Just think about where cash balances could be if reinvested at baseline S&P stock returns from 2009-2012. If the profits aren't going to be distributed to shareholders and/or reinvested in the business (or even reinvested in someone else's business), then there is a huge drag and the stock deserves to trade at low multiples.


    If you want to look at a sector that operates very efficiently from a capital standpoint, it would be the REIT space. Some people look at REIT's high dividend distributions (no retained earnings) as a negative. This is nonsense. It is a wonderful mechanism where value creation is forced out to shareholders on a current basis. And, when management wants to invest in something new and exciting, they have to come back to the capital markets with a reasonable story on how/where they will invest the money. In short, high dividends keep management on a short leash and reduce agency risk. Why would any shareholder give AAPL even $1 of new capital, knowing they might never see it again? Give that same $1 to SPG, however, and you will benefit from a relentlessly efficient capital allocation team and a rapidly increasing dividend.


    Now back to AAPL and Einhorn's suggestion to distribute preferred stock to shareholders. This is simply a way for AAPL to get its effective dividend rate up. If the company won't raise dividends much on the common, then distribute a class of higher-yielding preferred to shareholders and funnel out cash that way. It's a good suggestion that deserves to be considered. But pending some sign that the Board appreciates these issues, AAPL just looks like a beautiful, attractive, glittering and unmovable value trap.
    7 Feb 2013, 12:22 PM Reply Like
  • I do agree that the capital could be more efficiently re-invested in some of the indexes.
    7 Feb 2013, 06:01 PM Reply Like
  • Take a look at the stock price chart over the past 10 years. The price looks collapsed. It will take hundreds of billions or even another trillion to ramp it back up.


    In other words, a Miracle.
    7 Feb 2013, 02:12 PM Reply Like
  • Einhorn is a corporate looter, and a short term player. Nothing wrong with that. It takes all kinds to make a market. Einhorn wants cash now, and screw the long term interests and growth possibilities for Apple. So the long term investors in Apple will be severely, adversely affected if Einhorn's demands are instituted by Apple.


    Tim Cook, in eliminating a parasite class of senior securities: preferred shares, is doing exactly what Steve Jobs would have done. Tim Cook has shown that he has the best interest of the long term Apple investors in mind, and he should be supported in his efforts to permanently bar Apple from issuing preferred shares, by long term Apple investors, and by long term Apple users, whose brilliantly successful Apple Ecosystem's growth and efficiency can be compromised or stunted, by Einhorn's nonsense proposals.
    7 Feb 2013, 02:39 PM Reply Like
  • Apple's own response contradicts you.
    8 Feb 2013, 05:12 AM Reply Like
  • There is definitely too much to read about Apple but something I have not seen in what articles I have been able to read, is anything about what that cash hoard could do to get content for the iTV. It seems that the greatest hurdle they face is getting the providers of content to contract with Apple. Perhaps Apple's imagination can be tested once again to solve this dilemma. I can afford to be patient if they can use that cash for a big surprise.
    7 Feb 2013, 02:39 PM Reply Like
  • I think people are missing the central point. The company does NOT operate for the benefit of its employees or board of directors. Its focus is on making money for shareholders. If anyone has not noticed Apple shareholders have taken a terrible beating over the last five months. It is incumbent on the management to do something about protecting the share price. Every suggestion is worth some intense discussion not to be rejected outright.
    7 Feb 2013, 02:39 PM Reply Like
  • How about over the last 5 years? did they take a beating?
    8 Feb 2013, 10:16 AM Reply Like
  • Greenhorn is probably alarmed that the bulls driver for the last 4.5 yrs is taking it easy these days, hard to replace a company that was/is 20% of the NASDAQ and 5% of the S&P. Don't see NFLX or AMAZN filling that gap; they just don't have the same ring too em. Besides its only been 48 hrs since from the last major Apple headline. I was beginning to wonder. President probably gets apple updates as part of his national security briefing each mrng.
    7 Feb 2013, 02:49 PM Reply Like
  • Hey folks that cash is not in a bank account, it's invested, and used for "working capital"--Good Lord!!!. And working capital can be used for R&D and R&D leads to new products.... does anybody get this or am I in the twilight zone??
    7 Feb 2013, 02:52 PM Reply Like
  • You are in the twilight zone. R&D is a separate line item. That cash is just sitting in the warehouse doing nothing. That is the whole point and the whole problem.
    8 Feb 2013, 02:51 AM Reply Like
  • Apple responds to Greenlight

    7 Feb 2013, 03:45 PM Reply Like
  • Einhorn's on point that Apple's management of its balance sheet is almost comically bad and that they've done almost nothing to unleash the enormous potential stored in their huge cash position. His fund holds about a million shares of Apple (which is trivial compared w/ some of the heavy hitter funds in the stock), so unless he's able to rally the Fidelities and the Vanguards and other huge stakeholders , he'll get nothing done except get occasional share price pops every time he flaps his gums on CNBC.
    7 Feb 2013, 03:55 PM Reply Like
  • It's funny how markets react to non-events. Basically 2 things happened today. (1) Einhorn made public a proposal to Apple to offer preferred shares and w/ some fuzzy math, each $50 billion of preferred issuance will somehow be worth $32 in additional shareholder value. (2) Apple said that they would evaluate Mr. Einhorn's proposal. Translation: We have no intention of doing what this guy says, but we have to say something.


    Naturally investors go diving for the buy button, although nothing that Einhorn proposed will change whatever Apple had planned to do anyway. He did coax an admission by Apple that discussions are taking place.
    8 Feb 2013, 02:49 AM Reply Like
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