(The author is a Reuters Breakingviews columnist. The
opinions expressed are his own)
By Jeffrey Goldfarb
NEW YORK, Feb 22 (Reuters Breakingviews) - David Einhorn has
done his best to channel Steve Jobs. A one-hour pitch on
Thursday by the U.S. hedge fund manager enlisted the late Apple
(AAPL.O) founder's own value propositions and presentation
tactics to try and sell the idea of a new class of preferred
stock for the gadget maker. It's just not obvious Apple owners
will embrace the same kind of innovation consumers do.
The iPrefs, as the Greenlight Capital founder now brands
them, aren't exactly cutting edge any more despite Einhorn
saying it's "the product Apple doesn't yet know it needs." He
rolled out a similar proposal last May, calling it Go-Ups –
Greenlight Opportunistic Use of Preferreds. It didn't catch fire
the way the iPhone did. That makes Einhorn's latest iteration
more like an updated model with fresh marketing.
The concept is now a little more accessible, but still lacks
the ease of a touch-screen. Einhorn reckons the best way to
unlock the value of Apple's $137 billion of cash is for the
company to issue preferred stock – one share for each common
share to start – with a quarterly dividend yielding about 4
percent in perpetuity.
The idea isn't terrible. It just lacks the sort of
simplicity that is Apple's hallmark, and which it could just as
easily bring to bear in finance as it does in technology.
Einhorn acknowledges that paying out a special one-time dividend
or implementing a stock buyback would considerably enhance the
share price too. He just thinks his creative engineering would
What Einhorn doesn't seem to do is attach any of the
uncertainty to his own conceit that he does to the other
alternatives. For example, he argues that dividend yields don’t
necessarily support stock prices – logic that also could apply
to his new class of Apple shares.
The company says it will consider Einhorn's invention, as it
should. It doesn't, however, make a lot of sense for him to link
the stock plan to a fight to unbundle a package of governance
proposals. Chief Executive Tim Cook says stockholders would
still have to vote on such an idea. In reality, though,
investors, who are among the most intractable consumers around,
just might prefer Apple to save the whizzy engineering for its
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Hedge fund manager David Einhorn made a one-hour
conference call presentation on Feb. 21 in an effort to persuade
Apple to create a new class of preference shares he says would
unlock the value of the company's $137 billion of cash.
- Einhorn, founder of Greenlight Capital, said Apple should
use $47 billion in cash to issue preferred stock he branded
iPrefs with a quarterly dividend of 50 cents in perpetuity. The
stock would be in high demand, he said, because "savers across
the country" are in desperate need of yield.
- Greenlight owns 1.3 million shares of Apple.
- Link to Einhorn presentation: here
- Reuters story: Einhorn says Apple "iPref" stock would
unlock value [ID:nL1N0BLBTM]
Where's Jony? [ID:nL1N0B79EK]
Curiouser and curiouser [ID:nL1N0ASLSF]
- For previous columns by the author, Reuters customers can
click on [GOLDFARB/]
(Editing by John Foley and Katrina Hamlin)
Keywords: BREAKINGVIEWS APPLE EINHORN
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