A U.S. judge ruled today in favor of stopping a vote by Apple shareholders on a proposal to change the company’s policy for issuing preferred stock.

Earlier this month Apple investor David Einhorn’s hedge fund Greenlight Capital filed a lawsuit against Apple, believing that the company was planning to remove preferred shares (higher ranking shares than typical common stock) with a change to its charter within a proposal.

Some investors are worried about Apple’s 26 percent stock price decline over the last six month, as well as its mountain of cash ($137 billion). The hedge fund has previously urged Apple to issue preferred stock for the purpose of returning more of the company’s accumulated cash to shareholders. (So basically, Einhorn feels like shareholders are getting screwed.)

The lawsuit takes issue with a portion of the proposal that would eliminate the company’s power to issue preferred shares without a shareholder vote and claims that its in violation of SEC rules — a claim Apple flatly denied. Today, U.S. District Judge Richard Sullivan stopped the vote on the proposal, which was scheduled to take place February 27 during the company’s annual stockholders’ meeting.

Greenlight Capital issued the following statement about the rule:

This is a significant win for all Apple shareholders and for good corporate governance. We are pleased the Court has recognized that Apple’s proxy is not compliant with the SEC’s rules because it bundles different matters in Proposal 2. We look forward to Apple’s evaluation of our iPref idea and we encourage fellow shareholders to urge Apple to unlock the significant value residing on its balance sheet.

Apple image via Shutterstock

Via The Verge

And to tell investors why each Apple shareholder should get perpetual preferred stock, for free.

Preferred stock is simply stock that, when it comes to payments of any dividends or other benefits, is first in line. Apple is attempting to change a rule in its charter which Greenlight’s David Einhorn has interpreted as eliminating preferred stock, although Apple has denied that charge, and CEO Tim Cook has called the Greenlight lawsuit a “silly sideshow.”

Greenlight is suing Apple to force the company to “unbundle” three proposed charter changes which are being presented as a package, saying that SEC rules prohibit grouping of proposals which must be voted on together.

One thing that’s unclear to me: the Greenlight lawsuit and shareholder campaign is, ostensibly, about “unlocking significant value for all shareholders.” Einhorn obviously wants an acceleration of Apple’s dividend program, which is already committed to returning $45 billion to shareholders’ pockets over the next few years.

That sounds good, but it’s hard to know how you can give everyone preferred shares. After all, if everyone’s special, no-one’s special. Right?

Here’s the announcement from Greenlight Capital, with all the conference details:

Greenlight Capital, Inc. (“Greenlight”), a value oriented, research-driven investment management firm, today announced that it will host a public conference call and webcast to discuss Apple Inc.’s (NasdaqGS: AAPL) capital allocation strategy and Greenlight’s proposal to unlock significant value for all shareholders.  Greenlight continues to ask shareholders to vote AGAINST Proposal 2 in Apple’s proxy, which would eliminate preferred stock from Apple’s charter and restrict the Board’s flexibility on capital allocation decisions.  On the call, Greenlight will provide additional details regarding the options available to Apple, including the merits of Greenlight’s suggestion of distributing perpetual preferred stock to Apple shareholders for free.

The conference call and webcast will take place on February 21, 2013 at 2:00 p.m. Eastern.  The conference call may be accessed by dialing 1-800-901-5241 (U.S. callers) or 1-617-786-2963 (International callers) and entering the passcode 62063868#.  Those who intend to participate in the call should dial in at least 20 minutes in advance.   A replay of the call will be available through March 6, 2013 by dialing 1-888-286-8010 (U.S. callers) or 1-617-801-6888 (International callers) and entering the passcode 45128663#.  The webcast can be accessed by visiting www.media-server.com/m/p/aj2p6kq7.

photo credit: lemagit via photopin cc