Apple to 'evaluate' hedge fund's cash demand

In a response to a legal threat from a prominent shareholder, Apple says it's still evaluating its cash pile options.

James Martin/CNET

After a complaint from a notable Apple investor that the company needs to share more of its cash pile with investors, the iPhone and Mac maker says it's "evaluating" its possibilities.

In a statement today, Apple said it's aware its cash has grown beyond what is needed to run day-to-day business -- hence its dividend and stock buyback plan -- but that it is still talking about other possibilities.

"Apple's management team and Board of Directors have been in active discussions about returning additional cash to shareholders," the company said this afternoon, just before the close of trading on Wall Street. "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."

The company added that it had found itself "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."

Earlier today Apple was sued by Greenlight Capital, a hedge fund run by David Einhorn. In the group's complaint, Einhorn said that the company needed to distribute preferred stock to current shareholders, and that Apple had balked at the idea when it was first discussed.

Einhorn earlier said he understands that Apple wants a large cash hoard to be strategic, make acquisitions, and be secure, but he believes issuing high-yielding preferred shares to existing shareholders would allow Apple to share the value on the balance sheet but still hold a large amount of cash.

Apple responded saying that the No. 2 proposal in its proxy (which is currently being voted on ahead of the company's annual shareholders meeting later this month) does not keep the company from issuing the preferred stock, and already "has the support of many of our shareholders."

Shares of Apple closed today at $468.25, up $13.55 or nearly 3 percent. After hours, shares were trading at $466.87, down $1.38.

Apple's entire statement:

Statement by Apple

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.

CNET's Shara Tibken contributed to this report.

About the author

Josh Lowensohn joined CNET in 2006 and now covers Apple. Before that, Josh wrote about everything from new Web start-ups, to remote-controlled robots that watch your house. Prior to joining CNET, Josh covered breaking video game news, as well as reviewing game software. His current console favorite is the Xbox 360.

 

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