This week, prominent Apple investor David Einhorn, founder of Greenlight Capital, accused Apple of hoarding its $137 billion cash pile instead of mobilizing it to return value to investors…like Einhorn, for example.
He also opposes an Apple-led plan to remove “preferred stock” status from some of its classes of shares. To press the point, he’s suing Apple to prevent it from converting the stock status. Instead, he wants Apple to extend the preferred stock option as a way of delivering income to investors that’s different from Apple’s current plan to issue dividends.
Apple has responded with a press release addressing the matter–something that’s very unusual for the secretive firm. It explains that early in 2012 its cash pile exceeded the size needed to actually run its business and that its accumulation of cash ($23 billion more from the last quarter alone) was in excess of its core business needs. So as well as continuing with its plan to pay dividends, the company is also in “active discussions about returning additional cash to shareholders.” It will also “thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock.” Apple’s share price has bubbled up as a result.
Confused? Don’t be. The recent shenanigans about Apple’s share price are entirely divorced from the company’s record performance, and are more about the whims of analysts and investors whose goal is to rake in cash–not to “make world-class products.” Apple is answerable, to some extent, to its investors no matter how different their agendas are, and this is the company’s reaction.