Apple’s responded to calls from shareholders to return some of its vast pile of cash, and says it’s now actively looking at the idea.
Major shareholder Greenlight Capital has accused Apple of ‘hoarding its cash’, and has filed a lawsuit against the company.
“We believe Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders,” says David Einhorn, president of Greenlight.
“Over the last several months, we have had an ongoing dialogue with Apple regarding one option to do so, namely the creation of a new security, a perpetual preferred stock that would be distributed at no cost to Apple’s existing shareholders, and would provide an attractive, sustainable dividend while preserving Apple’s financial resources to pursue its business strategy.”
Apple’s cash reserves have risen from $98 billion this time last year to a massive $137 billion – almost a third of its market value, much more than most companies retain.
However, its growth as a company has slowed significantly, and its stock price has fallen by more than a third since September. Einhorn describes it as having a ‘Depression-era’ mentality.
He’s particularly disappointed in Apple’s recent proposal to eliminate ‘blank check’ preferred stock from its charter – ‘an unprecedented action to curtail the board’s options’.
However, Apple says its proposals would not prevent the issuance of preferred stock altogether – merely requiring such a move to have shareholder approval.
“Currently, Apple’s articles of incorporation provide for the issuance of “blank check” preferred stock by the Board of Directors without shareholder approval,” it says in a statement.
“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.”
The lawsuit, if it goes ahead, will reach the courts later this month.