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Your move, Tim Cook.
Apple was dealt a major blow in its battle with David Einhorn, when a judge sided with the hedge-fund manager and blocked Apple from moving ahead with a shareholder vote on a controversial proposal.
Manhattan federal judge Richard Sullivan yesterday granted Einhorn’s bid to stop Apple from lumping several measures together as one proposal at its annual shareholder meeting next week.
Part of Apple’s proposal would have required shareholder approval for the company to issue preferred stock — a move that several large investors believe to be shareholder-friendly and good corporate governance — but which Einhorn opposes.
The founder of $8 billion hedge fund Greenlight Capital has been lobbying the iPhone maker to return some of its $137 billion cash hoard to investors in the form of preferred stock or — as he calls them “iPrefs.”
As part of his campaign, Einhorn sued Apple earlier this month to block the proposal. He argued that Apple violated the Securities and Exchange Commission’s rules against “bundling,” which deprives shareholders of the right to vote on each issue separately.
In a 16-page ruling, Sullivan agreed with Einhorn, saying Apple cannot proceed with the proposal at next week’s shareholder meeting.
Apple yesterday said it was “disappointed” with the court’s ruling and that it would pull the proposal from next week’s meeting as a result.
The stock closed up 1.06 percent, to $450.81.
“This is a significant win for all Apple shareholders and for good corporate governance,” Greenlight Capital said in a statement. “We are pleased the court has recognized that Apple’s proxy is not compliant with the SEC’s rules.”
Before the proposal was blocked on technical grounds, Einhorn had been urging fellow shareholders to vote against it as a “referendum” on his effort to get Apple to distribute some of its cash to investors.
The hedge-fund manager is calling for the tech giant to issue preferred stock that pays dividends of 4 percent.
At a recent investor conference, Apple CEO Tim Cook called the idea “creative” and said he would consider it.
While Einhorn scored a legal win, some shareholders criticize him, saying that he is standing in the way of corporate governance.
“Our position is that Apple should re-introduce the measures as soon as it makes sense,” said Bill Dempsey of the Nathan Cummings Foundation, which also owns Apple stock.
Earlier this week, the foundation, which also invests in Greenlight through a fund of funds, sent a letter to Einhorn asking him to back off his campaign to block the proposal.
By depriving them of a vote on preferred stock, “you undermine shareholders’ rights, to no end whatsoever,” the letter said.
Also siding with Apple is the $253 billion California Public Employees Retirement System.