Apple issued a rare statement Thursday in response to the proposals to and subsequent lawsuit against the company by Greenlight Capital manager David Einhorn. Apple’s statement addresses claims by Mr. Einhorn that an upcoming shareholder proposal would eliminate the company’s ability to issue preferred stock, something that he wants to see happen.
Apple's full statement is below. We will update this story as additional information becomes available.
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.
AAPL rose sharply upon the release of the company's statement, and is now trading at 469.20, up 14.90 (3.28 percent) on the day. Update: AAPL closed the day at 468.25, up 13.55 (2.98 percent) after heavy volume in the final minutes.
Note: The author currently holds a position in AAPL which was not a factor in the research, preparation, or presentation of this article.