Here’s Einhorn’s Plan For Apple
David Einhorn says he has an easy and mutually acceptable fix for Apple (NASDAQ:AAPL) to distribute more of its cash to shareholders, and he’s trying his best to convince the company’s other investors to believe in his plan. Einhorn organized a conference call on Thursday in an attempt to explain the reasons behind the lawsuit his Greenlight Capital fund has filed against Apple ahead of the company’s annual shareholders meeting on February 27.
During the call, the hedge fund manager recommended Apple start issuing preferred shares called iPrefs with a face value of $50 to each common stock-owning shareholder. Each iPref would pay off a $2 per share annual dividend and would be publicly traded, he explained. The iPrefs would yield more than the long-term debt of Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM), he argued. The Greenlight Capital founder said his proposed capital allocation strategy was “a win-win for everyone.”
While on one hand it would help Apple bring back some of its offshore cash pile back into the U.S., it would also open the company up to a new group of investors who want a low-risk investment with regular returns, he said.
“Apple can redeem the [iPrefs] for face value, shareholders should expect to receive 50 cents per quarter, every quarter, forever,” he said. It would not cost Apple any of its existing cash stockpile, he added, explaining the shares were a form of form of equity, not debt…