The Judge overseeing David Einhorn and Greenlight Capital's lawsuit against Apple over a proposal to allow shareholder voting on preferred stock options ruled on Tuesday that bundling together three issues into a single vote may violate U.S. Securities and Exchange Commission rules. Judge Richard Sullivan, however, stopped short of saying Apple proposal would cause irreparable harm, which means Mr. Einhorn doesn't stand a good chance of winning an injunction.
"Candidly I do think the likelihood of success is in favor for Greenlight on the merits," Judge Sullivan said, according to Fortune.
Mr. Einhorn, an Apple shareholder himself and investor with Greenlight Capital, filed the lawsuit against Apple because he feels the company should give more money to shareholders. He wants to see preferred stock as an option, too, but without a requirement that shareholders vote on whether or not those options should be issued.
Apple CEO Tim Cook called Mr. Einhorn's lawsuit a "silly sideshow" when he was speaking recently at the Goldman Sachs Technology and Internet Conference.
"We decided to eliminate the ability to issue blank check shares ourselves. We could still do it, but would have to go to shareholders for approval," Mr. Cook said. "So frankly, this seems bizarre to me that we're being sued over something that's good for shareholders."
Ultimately what Mr. Einhorn wants is an easy way for Apple to issue preferred stock without first seeking shareholder approval, which could ultimately work out well for him and his hedge fund investors, espcially since his firm holds 1.3 million shares, and he has 275,000 call options himself.
Shareholders are scheduled to vote on the Apple's proposals on February 27, and the Judge said he'd present his ruling ahead of the meeting. Apple's legal team suggested he take a "wait and see" approach to the issue, which Judge Sullivan seemed open to following.
That most likely doesn't please Mr. Einhorn who really wants to get more money out of Apple as a major shareholder, and requiring shareholder approval before issuing prefered stock is a hurdle he'd rather not see in place.
Apple isn't keen on being told what to do, and has promised to fight the lawsuit. The company said in court the proposal "only formalizes Apple's stated commitment to seek shareholder approval if it wants to issue preferred shares."
That's not good enough, however for Mr. Einhorn. The bottom line is that he wants more money from Apple as a shareholder, and he's willing to go to court to try and force the cash out of the company.