Star hedge fund manager David Einhorn has a new product that he wants Apple to offer: the iPref. In an unusual hour-long public conference call,Einhorn,who has filed a lawsuit against Apple as part of an effort to get the iPhone and iPad maker to distribute more of its $137-billion cash pile,detailed the merits of distributing perpetual preferred stock to reward investors and boost a share price that he says is undervalued.
This is not complicated,its merely unfamiliar, Einhorn said about his perpetual preferred stock idea. Heres the product that Apple doesnt yet know it needs, he said,a riff on the mantra of Apple co-founder Steve Jobs that consumers dont know what they want.
Einhorns firm,Greenlight Capital,currently holds 1.3 million Apple shares,now worth nearly $600 million. Einhorn said Apple should use $47 billion in cash to issue preferred stock with a quarterly dividend of 50 cents in perpetuity. The stock would be in high demand,he said,because savers across the country are in desperate need of yield.
It has a base value of $50 and pays a dividend of $2 per year, he said. Apple can redeem them for face value,but shareholders should not anticipate getting the face value. They should expect to receive 50 cents per quarter,every quarter,forever.
Colin Gillis,an analyst at BGC Partners,said the conference call by Einhorn,who like most hedge fund managers typically makes few disclosures about his investment views beyond required regulatory filings,was a plus for him.
I think it helped his plight, Gillis said. He laid out a well articulated pitch. He broke down various scenarios,showed what would happen under different cases or expected outcomes. He makes a compelling case.
As of the end of December,Apple had $137.1 billion in cash,up 68% from the end of its 2011 fiscal year on September 24,2011. More than two-thirds of that amount is held overseas.
Einhorn went on his public attack in early February with the suggestion for perpetual preferred stock. He then sued the company over the formulation of its proxy statement.