Apple Antagonist Reveals iPrefs Stock Plan

In a conference call with Apple investors, Greenlight Capital Inc. founder David Einhorn announced his proposal for Apple Inc. to issue preferred stock to its shareholders. Einhorn says the strategy would give more value to investors without touching Apple’s stack of cash.

“iPrefs” as Einhorn calls them, would roll out a little at a time to give investors a chance to warm up to the unfamiliar stock offering. Einhorn says the strategy is innovative and more attractive to investors than Apple’s own “Proposal 2” which Einhorn has sued to stop.

“Apple’s attitude towards managing its cash has been exceedingly non-innovative,” Einhorn said yesterday. He asserts that iPrefs would return $61 per share more to investors than other proposals on the table. The $50 shares would pay a 4 percent dividend annually and help Apple attract new investors interested in low-risk opportunities. One or more iPref shares would be given free to current shareholders.

Not Everyone’s an Einhorn Fan

Einhorn is a divisive man among Apple shareholders and even some of Greenlight Capital’s contributors are trying to reign the fund manager in. The Nathan Cummings Foundation, which invests in Greenlight, wrote a letter to Einhorn stating their opposition to his lawsuit.

Rich Clayton, research director at CtW Investment Group, is concerned that Einhorn’s plan won’t benefit shareholders as much as claimed.

“Our concern is that Apple’s proposal is a very pro-shareholder resolution that is being hijacked,” said Clayton, “Greenlight’s tactics don’t make a lot of sense.”

CtW Investment Group represents pension funds that hold 2 million Apple shares. Clayton and others are concerned the iPrefs proposal won’t return as much value to shareholders as Einhorn claims and that the offering won’t be attractive to investors on a fixed income.Einhorn calls his plan low-risk but Clayton disagrees.

Silly and Bizarre

Inside the Apple camp Einhorn is by turns ignored, disdained, and even taken a bit seriously. Soon after he filed the lawsuit, Apple said it would review his proposal and Apple spokesman Steve Dowling declined comment yesterday after the iPref announcement.

But at a Goldman Sachs conference earlier this month, Apple CEO Tim Cook called the lawsuit a “silly sideshow” and a “distraction.”

“This seems bizarre to me that we’re being sued over something that’s good for shareholders,” Cook said. Apple will consider issuing preferred shares, but it’s not likely to be under Einhorn’s plan.

[Via Bloomberg BusinessWeek]