Aswath Damodaran isn't crazy about David Einhorn's Apple (AAPL) preferred stock proposal....

Aswath Damodaran isn't crazy about David Einhorn's Apple (AAPL) preferred stock proposal. "Issuing preferred stock will not add value to the company," the finance prof. argues. Moreover, while such a move could lift shares by removing investor fears of never seeing much of the cash Apple generates, regular dividends and/or buybacks could do the same. Nonetheless, Damodaran is glad Einhorn is "rocking the boat," as it "opens the door to a healthy discussion about how Apple should deal with its large and growing cash balance." (previous)
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Comments (26)
  • goofydon
    , contributor
    Comments (235) | Send Message
    1. Increase the regular dividend
    2. Significantly increase the stock buy backs
    3. At least a 5 for 1 stock split
    4. Not interested in preferred stock
    9 Feb 2013, 11:16 AM Reply Like
  • davioud
    , contributor
    Comments (32) | Send Message
    to Apple board :just do something , stop being arrogant ,
    9 Feb 2013, 11:28 AM Reply Like
  • davioud
    , contributor
    Comments (32) | Send Message
    you do not need to invent a new gadget every 6 months to lift your stock. this is nonsense and silly . just do your job right, keep the revenue stream and have your shareholder participate in your cash. even if it means buying other companies or other businesses.
    9 Feb 2013, 11:32 AM Reply Like
  • seandixon1
    , contributor
    Comments (6) | Send Message
    Very simple:
    1) out innovate: when S4 comes out, bring out 5S/6 and IOS 7
    2) defend against the noise in the media: stop the bullying. Bring out some targeted creative ads.
    3) china and India phone: $850 iPhone won't sell there.
    4) increase dividend at least 50%
    5) 10:1 split
    6) put Steve Wozniak and Bill Clinton on your board. Get rid on Andrea Jung and Al Gore (he's just milking the cow)
    9 Feb 2013, 12:13 PM Reply Like
  • drmwsunner
    , contributor
    Comments (127) | Send Message
    Rocking the AAPL is a good thing...these gentlemen running the AAPL show are not risk takers like Jobs...Unfortunately for us, Steve left the professor in charge. Not a good thing. We need visionaries, but instead, we got a stuck-in-the-mud professorial engineer. He acts like he's in charge of an old folks home for billionaires. He's maintaining and he's not pushing the envelope. We need some innovation, creativity, ballsy moves....David Einhorn finally got up the nerve to say something for the investor base...keep on "rocking." My real fear is that Timmy is not up to the challenge. He's already let this thing go to hell in a hand basket with nary a word of defense for the stock.
    9 Feb 2013, 12:23 PM Reply Like
  • Mathias Holmstrøm
    , contributor
    Comments (238) | Send Message
    I don't think Ashwath really understood Einhorn's argument.
    9 Feb 2013, 12:25 PM Reply Like
    , contributor
    Comments (70) | Send Message
    Really Mathias??? I think Mr. Damodaran is pretty capable of figuring out what was proposed. The last time I heard him speak he made more sense than anything I have heard in months. I can't believe CNBC gave him the air time.....
    9 Feb 2013, 02:10 PM Reply Like
  • Contrariety
    , contributor
    Comments (24) | Send Message
    True. I don't think he realized that the entire article was one big strawman. He failed to realize the distinction between 'unlocking value' and 'creating value,' turning much of the criticism into a semantic diatribe.


    That said, I am big Damodaran fan. The guys knows his corporate finance.
    9 Feb 2013, 04:19 PM Reply Like
  • XRTrader
    , contributor
    Comments (708) | Send Message
    Mathias - i have trouble believing that. Damodaran has a very impressive grasp of corporate finance and valuation.
    9 Feb 2013, 07:28 PM Reply Like
  • davioud
    , contributor
    Comments (32) | Send Message
    increase dividend by 100% ,10/1 split the stock this will help
    1/ make the stock affordable to small investors
    2/ get rid of the wild swings +10 or -10 everyday that attracts machine trading and all other crooks who spread rumors
    3/ finish with the casino or lotto mentality .
    And just look for the stock to go up slowly , this stock is now used by casino gamblers.
    9 Feb 2013, 12:55 PM Reply Like
  • tjmxxx
    , contributor
    Comments (99) | Send Message
    I have never in my life heard of Ashwath or what University he represents. I have no desire to hear his opinions either. His name alone is enough for me.
    9 Feb 2013, 02:21 PM Reply Like
  • orangutan
    , contributor
    Comments (261) | Send Message
    Embrace ignorance!
    9 Feb 2013, 07:28 PM Reply Like
  • XRTrader
    , contributor
    Comments (708) | Send Message
    Damodaran is an NYU professor of finance. He's one of the most well known academics on stock valuation and corporate finance. His articles and books are staples of the field. And, to top that off, he publishes his valuations on his own web site, and announces when he is buying a stock because it's "too cheap". He announced a couple weeks ago that he was buying AAPL because the marker was under-valuing it.
    9 Feb 2013, 07:30 PM Reply Like
  • croatkid1
    , contributor
    Comments (206) | Send Message
    1. Increase the Dividend from $2.65/share/Qtr to $4.00/share/Qtr.
    2. Have a One-Time Special Dividend of $30.00/share.
    3. Have a 10:1 stock split.
    4. Get all of the dead wood like Al Gore, etc. off of the BOD.
    5. Do something productive and immediately with China Mobil.
    A possible 600 Million Subscribers List cannot be equaled any
    where on this earth.
    6. Start selling all of your iPhones and iPad Mini's in India which
    has a population approaching 1 Billion people.....
    9 Feb 2013, 05:16 PM Reply Like
  • tom1119
    , contributor
    Comments (42) | Send Message
    A stock split is ridiculous. Buying 10 shares at $47 or buying 1 share at $470 is EXACTLY the same thing. I recently added to my holdings by buying 6 shares. It cost me $7.95 in commission, the same as if i had bought 60 shares, and even though i only bought 6 shares, I still own $2,700 more of Apple stock than i did last week. If small investors can't figure this out, then they shouldn't be investing in the stock market. The best use of their money is buy back shares, that gives Apple a 2.2% return on their money based on current dividend. This is probably a better return than what they're currently making on their hoard of cash. The second best thing is to raise their dividend, maybe 25% every 3 quarters. They could do that for 5 years, have a $10 quarterly dividend, and probably still have a $100 billion war chest.


    9 Feb 2013, 06:18 PM Reply Like
  • Matt Jonza
    , contributor
    Comments (86) | Send Message
    It's a rare occasion... But I'm with Cramer. (Even if its ridiculous)


    Apple should buy Netflix and put out an Apple TV. Talk about an exciting way to use all of that cash.
    9 Feb 2013, 08:09 PM Reply Like
  • chopchop0
    , contributor
    Comments (5155) | Send Message
    Why would aapl do that now after nflx had basically tripled from its lows.
    10 Feb 2013, 12:40 AM Reply Like
  • Matt Jonza
    , contributor
    Comments (86) | Send Message
    True, bad timing. But the idea is intriguing... it was more of "apple has more cash than it knows what to do with" statement than a serious suggestion.


    Just saying though... Netflix is the only thing I use on my smart tv. If only an Apple TV had that capability? Billions upon billions haha
    10 Feb 2013, 12:54 AM Reply Like
  • Rudester
    , contributor
    Comments (3369) | Send Message
    And for those of you that haven't voted your proxy, please don't vote to re-elect Andrea Jung to the board. She got fired from Avon for her performance. What makes her qualified to be an Apple board member?
    9 Feb 2013, 09:34 PM Reply Like
  • hahaha48
    , contributor
    Comments (1411) | Send Message
    lets be honest
    everone wants to make money mostly for themselves
    So when a company only cares to make money for the executives the share holders should fight them.


    Apple should be sue for not taking care of their stock holders interest. I do not care about Apple's stock prices 3 years from now. I only care about the next few days. When their stock price are going up the executives can do whatever they want. But when they drop by 35% they lost that right and should start doing something for the stock holders
    9 Feb 2013, 10:31 PM Reply Like
  • jugadores
    , contributor
    Comments (3) | Send Message
    All that cash. Put it into startups or strongly competitive ventures. But use it. And if share price comes down -- as it should -- It will animate the investor base.
    10 Feb 2013, 12:01 AM Reply Like
  • Raj!
    , contributor
    Comments (20) | Send Message
    It is overdue for AAPL to return money to investors.
    The best thing to do is split 1:5 stock split ,so that many more investors can participate.
    Second thing to do is increase Cash dividend,even one time payment is fine.
    Preferred stock is bad idea of Einhorn.
    10 Feb 2013, 12:49 AM Reply Like
    , contributor
    Comment (1) | Send Message
    What about purchasing Nuance, before another company gobbles it up? Siri is from Nuance. Also it is an International company, so maybe off shore moneys could be used. Also it is cheap now.
    10 Feb 2013, 12:51 AM Reply Like
  • Lares Capital
    , contributor
    Comments (438) | Send Message
    There is one subtle, but important, difference between preferred stock grant and a large special dividend: shareholders' tax liability. The preferred tax liability is spread over dividend payments, the special dividend is immediately taxed.
    10 Feb 2013, 01:12 AM Reply Like
  • XRTrader
    , contributor
    Comments (708) | Send Message
    Exactly Igor - there are several reasons for the complexity of Einhorns proposed structure - and a lot of it is about taxes.


    1. Taxes to AAPL: Einhorn wants to prevent AAPL from repatriating any cash. They can issue more than 100 billion in preferred stock (according to him) based on off-shore cash, and the dividend for the preferred shares can be funded from current and future cash flows.


    2. Taxes to his investors: Obviously, he is rich, and his investors are rich. He prefers long term dividend streams to a single payout in terms of dividend size.


    Interestingly tho, he seems to want dividends over buybacks - which I assume is because he's rather pay the dividend tax than the cap gains tax (when the buy-back pushes the stock much higher)...
    11 Feb 2013, 04:44 AM Reply Like
  • rmackenzie
    , contributor
    Comments (2) | Send Message
    increase the regular dividend and stock buybacks now
    buy netflix now in June
    buy 3D systems in the last 1/4 of the year
    11 Feb 2013, 09:04 AM Reply Like
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