If you’ve been up on your Apple news the past few months, then you’ve probably heard about a “silly sideshow” that been going on about Apple’s stock. Basically, Greenlight Capital isn’t happy with the amount of cash their getting back on their investment in Apple, while Apple has been hoarding all their cash.
Hoping to convince Apple to give shareholders some of their cash, Greenlight Capitals found, David Einhorn, has a concocted a plan that would have Apple selling “iPref” stock to investors who want to eat Apple’s cake.
In an unusual public conference call this afternoon, Einhorn said that Apple should distribute $47 billion in preferred stock to fixed-income investors, and call it iPrefs. The iPrefs shares would issue 50 cents per quarter in dividends indefinitely so that investors can get higher yields out of Apple’s stock.
“It is not complicated. It is merely unfamiliar,” Einhorn said. “For savers across the country there is a desperate need for this. “While Apple wants to keep its cake, shareholders get to eat it too.”
That keeping the cake and eating it too analogy really doesn’t work, because once investors eat all the cake, there’s nothing left for Apple to hold onto. But it sounds nice while Apple still has over $100 billion in cash.
Einhorn says that his plan makes sense because even though Apple’s common stock is going to drop in price – thanks to his proposed $0.50 quarterly dividend – the iPrefs stock will offset that drop and add additional value.
The common stock and iPref stock would be worth $480 per share today, while Apple’s shares are only trading at $447 shares today on their current model.
Einhorn says he told Apple about this idea back in May, and that they’re going to consider it really soon, but after Tim Cook’s recent comments that Einhorn’s lawsuit is a “silly sideshow,” we have our doubts that Apple will be receptive to his proposal.
Source: Wall Street Journal