Greenlight Capital withdraws lawsuit against Apple
Greenlight Capital has withdrawn its lawsuit against Apple Inc., having successfully blocked a vote on a controversial stock proposal.
The move was largely considered a formality. But it still marks the end of a brief but unusual public dust-up between Apple and a major shareholder. In a statement issued Friday, Greenlight said: “Apple removed the bundled proposal from the shareholder meeting therefore resolving the issue.”
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In the end, the legal dispute proved to be a minor annoyance for Apple. But while Greenlight won, it also generated some backlash of its own from investors who were angry that a measure they felt was pro-shareholder had been blocked by Greenlight.
During Apple’s annual shareholder meeting on Wednesday, the company announced that votes on the stock proposal would not be counted because a judge had previously issued an injunction blocking the measure. However, one shareholder representative from the California Public Employees’ Retirement System revealed that before the measure was halted, 55% of shareholders had voted on it, and of those, 98% voted in favor.
That seemed to indicate that Greenlight and its leader, David Einhorn, were relatively isolated on the issue.
Bill Dempsey is vice president at the Nathan Cummings Foundation, an Apple shareholder that has often criticized the company’s governance practices in the past. Dempsey spoke at the shareholder meeting on Wednesday, praising Apple for proposing the measure, and chiding Einhorn and Greenlight for shooting it down.
“We parted ways with him on this particular issue,” Dempsey said Wednesday. “One investor should not be trumping all the others.”
The dispute centered around a proposal on Apple’s annual proxy that, if approved, would have required shareholders to vote on any plan to issue a special class of stock. Einhorn had been lobbying Apple for a year to issue such a stock as a way to deal with the company’s cash, which has now grown to about $137 billion.
Greenlight filed a lawsuit in federal court in New York, which Apple Chief Executive Tim Cook called a “silly sideshow.” The judge sided with Greenlight’s argument, saying Apple had unfairly bundled the stock proposal with other proposals into a single measure. Securities rules prohibit such a move.
Apple shareholders will now probably have to wait until next year to vote on the change. However, Cook has said that if the company decided to issue such shares, it would request a shareholder vote even if one is not required.
Apple must still grapple with the larger issue that Einhorn raised: What to do with all that cash. Cook this week said executives and the board are in “active” discussions about the matter, an indication that the company could soon increase its dividends or buy back more of its stock.
For the moment, though, shareholders appear to remain unsettled. On Friday, in midday trading, Apple’s stock was down $7.66, or 1.7% ,to $433.74. The stock stood at $448.97 when trading closed the day before the shareholder meeting. It remains well off its September high of $702.10.
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