Can Apple Be Shamed Into Action?

Those who support David Einhorn’s demand that Apple (NASDAQ:AAPL) return more money to its shareholders think the shame of a legal loss may prompt the company into action sooner than later.

A federal judge in Manhattan last week ruled in favor of Einhorn’s Greenlight Capital, ordering an injunction on an Apple proposal to limit the issuing of preferred stock. The judge accepted the hedge fund’s contention that Apple “bundled” three unrelated motions into one vote for its annual shareholders meeting, thus violating U.S. Securities and Exchange Commission rules.

But while Einhorn based, and won, the lawsuit on a technical issue, his larger battle is to get Apple to increase payouts to shareholders and start chipping at its $137 billion worth of cash holdings. He has recommended issuing iPrefs, preferred stock options that will yield 50 cents per quarter indefinitely.

University of Michigan at Ann Arbor professor Erik Gordon told Bloomberg that the court ruling was “a small win that keeps Einhorn in the game and his preferred stock proposal on the table” as Apple considers how to please its clearly miffed section of investors.

“The Apple board won’t be able to hide behind a supposed stockholder prohibition against issuing the preferred,” Gordon said. “The board will have to face its responsibility to consider the proposal and approve or decline it”…