Apple Sued, Asked To Dole Out More Capital

By: Zain Nabi  |   February 9th, 2013   |   Apple, News

Greenlight Capital, a hedge fund manager, has sued Apple, asking the company to end its conservative approach and dole out more capital to investors, Reuters has reported. Fund manager David Einhorn has urged Apple to bring more cash for investors, apparently in view of Apple’s current market position, which is not very commendable.

 

Since releasing its fourth quarter report, Apple has witnessed a decline in its stock value because the company had relatively lower profit in the quarter, while the predictions for the current quarter are also not very bright and chances of exceptional growth are almost near to zero. The declining stock value has worried many investors and Greenlight Capital wants the company to release more cash.

 

However, that is not going to be easy as Apple is known to have a very conservative approach when it comes to releasing cash. The company nearly went broke in the 1990s when its founder Steve Jobs was not around. Jobs later returned and his creative vision led to introduction of new gadgets including iPhones and iPads and took the company out of the slump.

 

Since Job’s death, a number of questions have been raised on Apple’s creative approach and its ability to keep on coming up with trend-setting products that become identity of the users. However, Tim Cook, Job’s successor, has tried his best to keep the company on the same path as it was during Job’s era.

 

Still, Einhorn is of the view that Apple must dole more cash out and should not get worried about losing it. He said during an interview on CNBC, via Reuters:

 

“It has sort of a mentality of a depression. In other words, people who have gone through traumas … and Apple has gone through a couple of traumas in its history, they sometimes feel like they can never have enough cash.”

 

In his lawsuit, Einhorn has targeted Apple’s proposal to eliminated “blank check” from its charter, but the company has also not stayed silent in the matter. Apple’s board has a right to issue preferred stock, but it is coming out with a proposal that will require shareholders’ approval to carry out this task. Apple’s statement says:

 

“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.”