David Einhorn, the hedge fund manager in Greenlight Capital Inc., sued Apple to protest against the company’s intention to limit the issue of preferred stock because this operation could decrease the possible profits of investors. Einhorn supports his decision to block an Apple shareholder proposal developing the idea that having $137 billion cash pile, Apple is obliged to provide the increased returns for shareholders without any limitations in relation to preferred stock (Lessin, Demos, and Benoit). The limitations for issuing preferred stock in the form of the shareholder vote is the first step to break the cash balance and ignore the investors’ interests (Denning). Thus, according to Einhorn, it is necessary to issue preferred stock basing on the operating cash flow and contributing to a 4% dividend rate (Rubin). From this point, Apple intends to decrease dividend payments with references to the definite limitations when the focus on preferred stock can be advantageous for growing the investors’ profits (Lessin and Demos). It is necessary to note that Einhorn stresses on issuing preferred stock without any limitations in order to meet shareholders’ interests and increase their profits basing on the company’s cash instead of contributing to the stock decline.
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The problem is in the fact that the developing situation provides evidences for supporting the public’s idea that Apple is at risk of the stock decline without providing the opportunities for investors to get more cash (Lessin, Demos, and Benoit). The compromise in relation to issuing preferred stock in order to meet the interests of Einhorn and his supporters can be discussed as the alternative course of action for Apple because today the positions of Apple within the industry are argued by marketers referring to Einhorn’s claim and associated discussions. Thus, Apple can give more cash to investors basing on the dividends and returns because the company has the necessary resources (Winkler).
The situation with issuing preferred stock in Apple can be discussed as challenging because the strategies and approaches of the company’s representatives contribute to supporting the viewpoint that Apple can lose its positions within the market under the impact of growing competitiveness (“How to Tap Apple: High-Yield Stock”). Furthermore, accentuating the proposal, Apple can be discussed as orienting to become an outlier within the industry (Lessin, Demos, and Benoit). Thus, it is necessary to pay attention to changing the company’s tactics and strategies in relation to providing dividends.
Denning, Liam. Apple’s Investor Charity Begins at Home. 2013. Web.
How to Tap Apple: High-Yield Stock. 2013. Web.
Lessin, Jessica, and Telis Demos. Einhorn Presses Case Against Apple. 2013. Web.
Lessin, Jessica, Telis Demos, and David Benoit. Apple Cash Pile Sets Off a Battle. 2013. Web.
Rubin, Ben. Einhorn Sues Apple Over Preferred Stock Plan. 2013. Web.
Winkler, Rolfe. Peeling Cash Off Apple. 2013. Web.