Another Day, Another Idea to Save Apple (AAPL); How about a 10-for-1 Split?

February 26, 2013 2:58 PM EST
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Last Friday, David Einhorn won a court ruling against Apple (Nasdaq: AAPL) blocking the tech giant from introducing a corporate governance proposal that would have made it harder for the company to issue preferred shares. The ruling keeps the door open on a fringe plan by the hedge fund manager, who wants Apple to offer preferred shares (iPrefs) as a way to return capital to shareholders, which he says will boost Apple stock by $150 per share. The idea faces opposition not just from Apple but from institutional investors and others on Wall Street.

Laurence Isaac Balter, Chief Market Strategist at Oracle Investment Research, is among those who is opposed to Einhorn's idea, and he has his own ideas about how Apple can support shareholders. Chief among them is a 10:1 stock split.

"With all due respect to Mr. Einhorn, I do not see how bleeding Apple’s cash flow to support anyone but those domiciled in the Cayman Islands with a tax-free dividend into perpetuity (and a 10% tax equivalent yield)," said Balter.

In his view, the problem is with retail investors, and psychologically is everything, thinks Balter.

"You see, the real problem with Apple shares is that we in the business know the stock is super cheap based on any valuation metrics you like. The problem is that the average American retail investor doesn’t buy P/E ratios. They buy (or sell) share price action. And in the past 6 months, non-block money flow selling has accelerated."

A stock split obviously doesn't change things fundamentally, but Balter thinks the cheaper price will attract retail investors and support shares.

Apple's annual meeting will be held on Wednesday, February 27, 2013 at 9:00 a.m. Pacific Standard Time and investors are expecting something big.

In addition to fringe ideas like 'iPrefs' or a stock split, investors in Apple are clamoring for: a one time special dividend; a doubling of the regular dividend; a large immediate share repurchase through a tender offer; and a larger ongoing share repurchase plan.

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