David Einhorn Wants Apple (AAPL) to Create a High-Yielding Perpetual Preferred Stock, Urges NO Vote on Proposal 2
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Price: $445.15 +0.68%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 2.7%
EPS Growth %: -18.0%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 2.7%
EPS Growth %: -18.0%
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In its activist action on Apple (Nasdaq: AAPL) today, hedge fund manger David Einhorn of Greenlight Capital is recommending the creation of a high-yielding perpetual preferred stock, that would be distributed at no cost to Apple's existing shareholders.
In a letter to shareholders today, Einhorn is recommending shareholders vote AGAINST Proposal 2 which eliminates the company's ability to issue preferred stock.
"We believe Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders," said Einhorn. "Over the past several months, we have had an ongoing dialogue with Apple regarding one option to do so, namely the creation of a new security, a perpetual preferred stock that would be distributed at no cost to Apple’s existing shareholders, and would provide an attractive, sustainable dividend while preserving Apple’s financial resources to pursue its business strategy."
"...Apple could initially distribute to existing shareholders $50 billion of perpetual preferred stock, with a 4% annual cash dividend paid quarterly at preferential tax rates... With this conservative action, Greenlight believes the Board could unlock hundreds of billions of dollars of latent shareholder value."
"... Assuming Apple retains its price to earnings multiple of 10x and the preferred stock yields 4%, our calculations show that every $50 billion of perpetual preferred stock that Apple distributes would unlock about $30 billion, or $32 per share in value."
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In a letter to shareholders today, Einhorn is recommending shareholders vote AGAINST Proposal 2 which eliminates the company's ability to issue preferred stock.
"We believe Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders," said Einhorn. "Over the past several months, we have had an ongoing dialogue with Apple regarding one option to do so, namely the creation of a new security, a perpetual preferred stock that would be distributed at no cost to Apple’s existing shareholders, and would provide an attractive, sustainable dividend while preserving Apple’s financial resources to pursue its business strategy."
"...Apple could initially distribute to existing shareholders $50 billion of perpetual preferred stock, with a 4% annual cash dividend paid quarterly at preferential tax rates... With this conservative action, Greenlight believes the Board could unlock hundreds of billions of dollars of latent shareholder value."
"... Assuming Apple retains its price to earnings multiple of 10x and the preferred stock yields 4%, our calculations show that every $50 billion of perpetual preferred stock that Apple distributes would unlock about $30 billion, or $32 per share in value."
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