Greenlight Capital’s David Einhorn has been victorious in his attempt to stop Apple shareholder voting on a measure that he believes would have put pay to his preferred stock scheme that could see Apple return more money to shareholders. But is the outcome really what is best for shareholders? 

Einhorn took issue with the fact that Apple was bundling a measure with two others in Proposal Number 2, due to be voted on at the shareholder meeting this Wednesday. 

He felt that the proposal would make it impossible for Apple to issue preferred stock in the future. 

In reality the proposal wouldn’t have blocked such a measure, it simply indicated that Apple must ask for shareholder approval to issue preferred stock if it wished to do so in the future, explains Forbes. 

Einhorn is not amused by Apple’s $137 billion cash stockpile and has accused the company of having a depression-era mentality. He has been pitching the idea of preferred stock to Apple as a means to return more money to investors. 

Apple CEO Tim Cook pointed out that Apple has been returning money to investors: last year Apple made a promise to return $45 billion to shareholders over three years through dividends and share repurchases. Cook also noted that last year Apple $10 billion on capital expenditures.

No to iPrefs

iPrefs aren’t the answer, according to Motley Fool. What Motley Fool doesn’t like about Einhorn’s proposal is the fact that Apple’s “war-chest” still remains untouched. Instead apple issues "iPrefs" - preferred stock - to its stockholders (at no charge). These will be worth $50 each, and yield 4% (a $2 annual dividend).

Einhorn agrees that such a move would cut Apple's EPS, and reduce the stock price from $450 to $430. But Einhorn indicates that this isn’t so bad as each $50 iPref would be worth $30 to each shareholder. 

Motley Fool thinks that Apple should simply return its cash hoard to shareholders. It thinks that if Apple made clear that it intended to do such a thing it would bring value investors back to the stock. 

In the meantime Apple should undertake a larger share buyback (to attract value investors) or a dividend boost (to attract income and value investors alike), suggests the report. 

It’s a way to reduce the taxation problem 

While the money does effectively belong to the shareholders, the problem is that much of that cash pile is offshore and would be subject to the high corporate income tax if it were returned to shareholders, who would then pay tax again on that income, explains Forbes. 

If Einhorn’s proposal is adopted it is a way to reduce the taxation problem, suggests Forbes. 

Significant disappointment

Due to Einhorn’s win, Apple will not be able to ask shareholders to vote on proposal 2. Apple says it is disappointed.

Einhorn said: “This is a significant win for all Apple shareholders and for good corporate governance.

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