Kara Swisher

Recent Posts by Kara Swisher

Ahead of Apple Proxy Fight Explainer, ATD Late-Night Chat With Greenlight’s Einhorn


Like me, David Einhorn — the brainy hedge fund star who is currently engaged in a proxy battle with Apple over a corporate governance procedure, related in this case to how to deal with its $137.1 billion cash hoard — is a bit of a night owl (or, in his case, an early riser).

So, when I pinged him around midnight PT about the conference call his Greenlight Capital is having with investors later today to better explain his effort to thwart an Apple effort to make it harder to issue preferred shares that pay a dividend, he offered to chat right then about what he was up to.

Einhorn has been fighting with Apple over its plan to let shareholders vote on the issuance of preferred stock, after the longtime Apple bull got no satisfaction from lobbying its board to issue preferred shares.

He then sued the company seeking an injunction to stop or invalidate next week’s vote on the company proxy proposal related to “blank check” preferred stock.

As The Wall Street Journal noted:

Mr. Einhorn’s lawsuit, filed in the federal court in Manhattan, argues that the very formulation of Apple’s proxy statement violates Securities and Exchange Commission rules that allow shareholders to vote on “each matter” in the proposals. The suit seeks a court injunction against Apple’s proxy vote, and says he asked twice this week for the company to stop the vote or to “unbundle” the proposal at issue, but was rejected by the company.

Although the Silicon Valley tech giant said it was talking to Einhorn, Apple CEO Tim Cook also hit back at an investment conference recently, saying that Greenlight’s legal moves were a “silly sideshow” and a distraction.

That said, a judge in the case later contended that there was a “likelihood of success” in Greenlight’s case.

Thus, in a time-honored blabby hedge-fund-dude manner, Einhorn decided to make his case even more noisily about the proxy proposal, which is up for a vote at Apple’s Feb. 27 annual meeting.

“We’re going to explain ourselves better, because I think that there has been reaction where people are asking, ‘Why don’t they just raise their dividend or do a buyback?'” said Einhorn in an interview. “We think the preferred stock idea is a lot better, and once people understand it, we want people to convert from worrying that it is complicated to wondering ‘Since it makes so much sense, why doesn’t Apple do that?'”

It sounds so easy, but it has not been, with a heated debate occurring since Greenlight went after Apple, and some dubious of Einhorn. This has clearly caused a lot of confusion that he said he hopes to clear up.

For example: “I think it is peculiar that people are focused on the blank-check preferred and taking away a takeover defense, since no one is going to be taking over Apple.”

Einhorn said he bears no ill will toward Apple over the capital allocation issue, which he said was typical across the tech scene.

“Apple has collected this cash hoard due to cultural issues within the industry and also within the company, some of which are partly understandable. Tech companies have learned over time they need to have cash in case of trouble, and there is also an element of comparing balance sheets. There is always a rationalization to justify any situation,” Einhorn said. “But we do not want to convince them to undo their cultural view. We want them to unlock value for shareholders. In this case, the cash is a product of Apple’s success, but it developed from being like several others to an extraordinary level because of Apple’s extraordinary success.”

While some have painted him as an Apple attacker, Einhorn begs to differ.

“I like that what we are offering is a win-win for everyone. There has been a lot of conflict around why Apple is holding so much cash for a long, long time,” he said. “We have a solution that allows shareholders to see that value and Apple to keep that cash.”

We’ll see, when Greenlight presents its case later today, doubtless with all kinds of fancy charts and graphs and numbers that will flummox my tiny brain. Until then, here’s its official press release on the call:


Urges Shareholders Vote AGAINST Apple’s Attempt To Amend Charter and Eliminate Ability To Issue Preferred Stock In Proposal 2; Apple Must Explore All Value Creation Options

NEW YORK — February 20, 2013 — 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.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik