Einhorn wins ruling against Apple in cash pile fight

NEW YORK Fri Feb 22, 2013 5:00pm EST

David Einhorn, president of Greenlight Capital, speaks during the Sohn Investment Conference in New York, May 16, 2012. REUTERS/Eduardo Munoz

David Einhorn, president of Greenlight Capital, speaks during the Sohn Investment Conference in New York, May 16, 2012.

Credit: Reuters/Eduardo Munoz

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NEW YORK (Reuters) - A U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with Apple Inc on Friday, blocking the iPhone maker from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping the vote on that proposal.

The vote was scheduled for February 27 as part of the company's annual stockholders' meeting.

Greenlight sued Apple on February 7 as part of a broader pitch to unlock more of Apple's $137 billion in cash for shareholders. Einhorn has argued Apple should issue preferred stock with a perpetual 4 percent dividend.

The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward that would eliminate Apple's power to issue preferred shares without a shareholder vote.

At issue is Apple's "bundling" of the measure on the preferred shares with two other unrelated matters into a single proxy proposal.

Greenlight said it supported two proposed the amendments but not the one on preferred shares.

Sullivan said Greenlight and another investor who also sued Apple "are likely to succeed on the merits and face irreparable harm if the vote on Proposal No. 2 is permitted to proceed."

Representatives for Apple did not immediately respond to requests for comment.

For Einhorn, the decision could provide leverage as he pursues his pitch for Apple to issue what he has called "the iPref," preferred stock with a perpetual dividend that he contends would reward investors and help boost the company's share prices.

In a statement, a spokesman for Greenlight called the ruling a "significant win for all Apple shareholders and for good corporate governance."

The lawsuit was centered on a narrow issue of whether Apple violated U.S. Securities and Exchange Commission rules by "bundling" the preferred shares item with two other unrelated matters into one proxy proposal.

Greenlight's lawyers contended the SEC rules were intended to protect shareholders from being forced to vote for a proxy proposal involving materially different issues that the investors might not entirely support.

Apple had argued Proposal No. 2, which only dealt with amendments to its charter, constitute a single matter and wasn't bundled. Sullivan called the company's arguments "unavailing."

"Given the language and purpose of the rules, it is plain to the Court that Proposal No. 2 impermissibly bundles 'separate matters' for shareholder consideration," Sullivan wrote.

The judge separately declined to block a vote from going forward on a separate proxy proposal, Proposal No. 4, which sought an advisory "say on pay" vote on Apple executives' compensation.

The proposal had been challenged by investor Brian Gralnick of Pennsylvania, who contends Apple did not disclose enough details about how it made its compensation decisions.

Sullivan rejected that argument, saying Apple's disclosures were "plainly sufficient under SEC rules."

Arnold Gershon, a lawyer for Gralnick at Barrack, Rodos & Bacine, did not respond to a request for comment.

Apple shares closed up 1.06 percent at $450.81 on the New York Stock Exchange on Friday.

The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.

(Reporting By Nate Raymond in New York; Editing by Martha Graybow, Gary Hill and Leslie Adler)

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Comments (5)
tmc wrote:
Welcome to the Grand Illusion. Come on in and see what’s happening….

Feb 22, 2013 5:12pm EST  --  Report as abuse
JapanViewer wrote:
Wow, this is pretty cool; Suing a mega-corporation on how they can should handle their money and treat shareholders, and winning too. Say what you want about hedge fund guys, but this is one for the little guy as well.

Feb 22, 2013 7:16pm EST  --  Report as abuse
JapanViewer wrote:
Wow, this is pretty cool; Suing a mega-corporation on how they should handle their money and treat shareholders, and winning too. Say what you want about Einhorn and hedge fund guys like him, but this is a win for the little guy. Go Democracy Go!

Feb 22, 2013 7:17pm EST  --  Report as abuse
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