Court Grants Einhorn Injunction Blocking Apple Shareholder Vote

iCelebrateA federal court issued an injunction blocking a vote on an Apple shareholder proposal originally scheduled to take place on February 27th, according to Reuters. The proposal would have prevented Apple from issued preferred stocks without shareholder approval.

Apple's management backed the shareholder proposal, arguing that it empowered the company's shareholders by giving them say so on how Apple handled such matters. Wall Street, especially Greenlight Capital head David Einhorn, believes that issuing a preferred stock with a permanent dividend represents the best way for Apple to return more of its astonishing cash hoard of more than US$137 billion to shareholders.

Greenlight Capital sued Apple to block the proposal arguing that its structure violates Apple's own bylaws. He further argued to shareholders that giving shareholders oversight on such things represented an unnecessary impediment to Apple unlocking more of its profits and getting the results to the shareholders to whom it belongs.

On Thursday, Mr. Einhorn went on the offensive with shareholders, coining the term iPrefs as the name for the preferred stock he wants Apple to issue. "Here's the product that Apple doesn't yet know it needs," he said as part of a presentation he made on the subject.

Greenlight Capital owns some 1.3 million shares of $AAPL, a stake he increased in the 4th quarter of 2012 as the stock declined. He also owns some 275,000 $AAPL call options.

As noted above, Apple's management backs the proposal. Apple CEO Tim Cook has argued that it is pro-shareholder, and has expressed dismay over why anyone would want to prevent such a pro-shareholder move.

"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 publicly about the kerfuffle. "So frankly, this seems bizarre to me that we're being sued over something that's good for shareholders."

Judge Richard Sullivan, who is overseeing the lawsuit, apparently agrees with Mr. Einhorn that the proposal violates Apple's bylaws. His ruling on Friday will prevent a vote on the measure.

$AAPL closed higher on Friday at $450.81, a gain of $4.75 (+1.06 percent), on very light volume of 11.8 million shares trading hands.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.