SAN FRANCISCO (Reuters) - Apple Inc’s move to eliminate from its charter the ability to issue preferred shares without first getting shareholder approval has received the support of the largest public pension fund in the United States, and an influential proxy firm.
Hedge Fund manager David Einhorn’s Greenlight Capital is suing Apple to get it to deploy its $137.1 billion cash pile more effectively by issuing preferred stock, which he says is superior to dividends or share buybacks.
His lawsuit, filed in U.S. District Court in Manhattan on Thursday, targets the proposal by Apple to remove from its charter “blank check” preferred stock.
That particular proposal is “bundled” with two other unrelated proposals, but will be collectively decided in a single vote, which Einhorn objected to.
The California Public Employees Retirement System, the owner of 2.7 million Apple shares, and proxy voting firm ISS Proxy Advisory Services, recommended on Friday that investors vote for Apple’s proposal. Calpers had indicated its support for the proposal in a filing earlier this week, but reiterated its backing after Einhorn filed his suit.
All shareholders should have a vote,” Anne Simpson, Calpers Senior Portfolio Manager and Director for Corporate Governance said on CNBC. “We don’t want the board cutting a deal on the side with a hedge fund out of fear of a lawsuit that will cancel the annual meeting.”
“This is a big issue that needs to be thought through carefully, and we want the board to come to all shareholders and give a chance to have their voice heard,” she added.
Apple is asking shareholders at its annual meeting on February 27 to vote on the proposal. ISS said its policy supported the elimination of “blank check” preferred shares due to their potential to be misused as a takeover defense because they can be issued at the company’s discretion.
“Moreover, should the board decide at some future date that an issuance such as Greenlight has proposed makes sense, and can demonstrate the benefit to shareholders, obtaining the requisite shareholder support to reinstate the provision is not likely to be an insurmountable obstacle,” ISS said in a research note.
But the firm, which issues recommendations on how shareholders should vote on proxy proposals, also believes the “bundling” of proposals is not in the best interest of shareholders.
Einhorn wants Apple to separate the three issues that are part of Proposal 2, which includes the “blank check” proposal.
He holds 1.3 million Apple shares worth about $600 million at current values.
Greenlight Capital said it was disappointed ISS did not recognize the unique circumstances surrounding Apple, which has $137 billion in cash and marketable securities.
Einhorn and other investors have accused Apple of not managing the cash and marketable securities effectively, limiting returns to shareholders.
Greenlight also reiterated on Friday its call to Apple shareholders to vote against the proposal.
Reporting By Poornima Gupta; editing by Carol Bishopric