Apple Says It Will Fight Greenlight’s Bid to Block Vote

By Christie Smythe & Adam Satariano – Feb 14, 2013 12:01 AM ET

Apple Inc. said it will fight Greenlight Capital Inc.’s bid to bar the company from adopting a measure restricting its ability to issue preferred stock.

The maker of iPhones and MacBooks filed a response yesterday in U.S. District Court in New York to the request made by Greenlight in its lawsuit.

David Einhorn, president and co-founder of Greenlight Capital Inc. Einhorn has accused Apple of having a “mentality of depression” with respect to its cash pile. Photographer: Scott Eells/Bloomberg

“The proposed injunction would harm the public interest,” and should be denied, Apple said in the filing. The measure “gives common shareholders greater power — the right to approve issuance of preferred shares,” Apple said.

Greenlight founder David Einhorn has said the tech company should issue high-yielding preferred stock to provide more value to shareholders from a $137 billion stockpile of cash. The measure up for vote would eliminate “Apple’s power to issue preferred stock,” Greenlight said in the company’s complaint.

The hedge fund claimed Cupertino, California-based Apple unfairly grouped the preferred share measure with other matters to be voted on at a meeting Feb. 27, violating the U.S. Securities and Exchange Commission “unbundling rules.”

Apple said in its filing that it’s not violating SEC rules and that the move only eliminates so-called “blank check” preferred stock provisions. Without the provisions, preferred shares could still be offered as long as investors approve the change, according to Apple.

‘No Injury’

“Apple’s proposal only formalizes Apple’s stated commitment to seek shareholder approval if it wants to issue preferred shares,” the company said in the filing. Greenlight “will suffer no injury, much less irreparable injury, absent the preliminary injunction.”

The Apple Inc. logo is projected on a screen at the California Theatre during a launch event in San Jose. At an investor conference yesterday in San Francisco, Apple CEO Tim Cook called Greenlight’s suit a “silly sideshow” and a “distraction.” Photographer: Noah Berger/Bloomberg

U.S. District Judge Richard Sullivan set a Feb. 22 hearing to consider Greenlight’s request to block the vote.

The battle with Einhorn is the latest episode in a long running tussle by Apple shareholders to get the iPhone maker to give more of its cash hoard back to investors in the form of a dividend or buyback. Einhorn has accused Apple of having a “mentality of depression” with respect to its cash pile.

At a Feb. 12 investor conference in San Francisco, Apple CEO Tim Cook called Greenlight’s suit a “silly sideshow” and a “distraction.” He said the company is considering giving more money back to shareholders.

Preferred Stock

In yesterday’s filing, Apple disclosed details of conversations between Cook, Chief Financial Officer Peter Oppenheimer and Einhorn about the possibility of issuing preferred stock.

In one of those conversations this month, Einhorn told the two Apple executives that a shareholder vote could pose a “roadblock that was not needed” to issuing preferred stock and that he wanted to “take the risk away,” according to the filing.

“We told Mr. Einhorn that Apple was considering his proposal, but that the board would not issue his proposed perpetual preferred shares without shareholder approval,” Oppenheimer said in a declaration filed with court.

Greenlight, which said it holds 1.3 million shares of Apple, said in an e-mailed statement in response to Cook’s comments that “if Apple thinks the lawsuit is a waste of resources, it could simply end the matter by complying with existing law and filing a new proxy that unbundles the proposed changes to the charter so that shareholders can express their views on each matter separately.”

The case is Greenlight Capital LP v. Apple Inc., 13-cv-900, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Christie Smythe in Brooklyn atcsmythe1@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Tom Giles at tgiles5@bloomberg.net