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Apple has swiftly responded to a lawsuit filed this morning by investor David Einhorn’s hedge fund Green Light Capital, in an attempt to quell further outcry from investors.
Einhorn believed Apple was planning to remove preferred shares (higher ranking shares than typical common stock) with a change to its charter, the New York Times reported this morning. But in its statement, Apple denied the preferred share change and said that it would welcome feedback from Greenlight and other investors.
“Contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock,” Apple wrote. Apple shares rose by $13.55, or around 3 percent, when it released its statement this afternoon.
Many investors are worried about Apple’s slowing stock performance, after falling more than 26 percent in the last six month, as well as its increasingly large stockpile of cash (now around $137 billion). But Einhorn is the first to publicly take action. Last year, Apple announced that it would be returning $45 billion to investors over the next three years, starting with a dividend.
Apple’s full statement is below.
By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.
We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.
Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock. We welcome Greenlight’s views and the views of all of our shareholders.
As a part of our efforts to further enhance corporate governance and serve our shareholders’ best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight’s proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple’s articles of incorporation provide for the issuance of “blank check” preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.
We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.
Check out Einhorn’s lawsuit filing below, via the New York Times:
Photo: Heather Kelly/VentureBeat