Hedge fund sues Apple over $137bn cash pile

An activist shareholder is demanding US technology giant Apple pay out more of its $137bn (£87bn) cash pile to investors.

The company has been sitting on a huge sum of cash for many years, and in 2012 that cash pile soared in size, climbing from $98bn last March.

US hedge fund manager David Einhorn (pictured) has now moved to sue the group, telling CNBC that Apple had a “Depression-era” mentality which gave it a tendency to hoard cash and play safe.

Einhorn, who owns Green Light Capital, told the television station: “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.”

Einhorn is proposing the company offer investors preferred stock which would pay a dividend over time.

It is not the first time the outspoken Einhorn has laid into large companies.

In 2011, he urged Microsoft Corp to get rid of its chief executive Steve Ballmer, accusing him of being “stuck in the past”.

Aple said in a statement: “By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.

“We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.”

Apple said the board had been having discussions over returning additional cash to shareholders, and is considering making changes to its company policy.

It added: “These changes were recommended independently of Greenlight’s proposal and would not preclude Apple from adopting their concept. 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. As such, Proposal #2 has the support of many of our shareholders.”

The news lifted Apple’s stock overnight, shares gaining 3% to $468.

 

This article was first published on Investment Week

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