Activist shareholder David Einhorn’s Greenlight Capital said it will challenge Apple Inc. (NASDAQ:AAPL) over its $137.1 million cash pile by voting against a shareholder proposal at the Feb. 27 annual meeting.
“We believe Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders,” Einhorn, who has shaken up scores of companies in recent years, said. He said he has had an “ongoing dialogue” with Apple management for several months about the problem.
Einhorn wants the Cupertino, Calif., company to create a new class of preferred shares, which could pass on some of the cash to shareholders. But Apple is asking shareholders to change its charter to forbid such an option.
Einhorn claimed the cash is equivalent to $145 per share, so that by failing to consider his plan, Apple is shortchanging shareholders. He said he's advocated issuing a new class of convertible shares that would pass on some of the money immediately.
Last year, Apple reinstated a $3.65-per-share quarterly dividend and also announced plans to buy back as many as 10 million shares over time. Other analysts have said the company is keeping too much cash and should either use it for operations are pass it on to shareholders.
Greenlight said it sued Apple in U.S. District Court in New York, because it believes the process violates rules set forth by the Securities and Exchange Commission.
Einhorn, who said New York-based Greenlight Capital owns more than 1.3 million Apple shares, also published a letter to shareholders asking them to vote against the proposal. It said the move is "an unprecedented action to curtail the company's options."
In 2007, Einhorn warned investors he believed Lehman Brothers was in danger of collapsing several months before the actual event. In 2011, he made an unsuccessful bid to buy into the New York Mets. Last year, he criticized management of Green Mountain Coffee Roasters (NASDAQ:GMCR), which caused the company's shares to plunge 10 percent in one day.
Apple didn't issue an immediate comment. Einhorn said his last contact with the company was Wednesday, when management indicated it might "reconsider" its plans but not withdraw the shareholder proposal.
Apple shares rose $4.40 to $459.10 in midday trading -- a far cry from their all-time record high of $705.07 of Sept. 21.