Tilted about this ?
- Thread starter GURPS
- Start date
Tilted
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ok sorry ....
No need to apologize.
I'm going to resist the opportunity which this subject presents to jump off onto my rant about how so many equity investors miss the fundamental conceptual point of equity investing.
As for Mr. Einhorn, he's pretty well known in the investment world. He's what you might call an activist investor. Sometimes I agree with him, sometimes I don't.
In this case I think he's on the wrong side of the issue. The thing is, Apple is one of the few really large established companies that gets it right when it comes to investor relations. Ultimately the interests of a company are those of its investors - its owners. They're supposed to, among other things perhaps, be making money for those owners. The issue is what time horizon, are they looking at long-term or short-term value for the owners. Apple's way of creating value for the owners is to try to run a great business. Unlike many companies, for the most part, it doesn't worry about what will help the stock price in the short term. This is revealed in many of the decisions it has made. It doesn't try to manipulate the stock price in the short term - it tries to run the business as best it can and, if it does a good job of that, the value of the stock will - in the long term - reflect the quality of the business.
Apple handles investor relations and stock issues pretty much how I would want every company I own to do so. The way it reports and what it reports (as well as what it doesn't report) is great. The way it handles compensation for top executives is spot-on. Tim Cook, the CEO, owns very little stock. When his RSUs have vested, they've been sold in accordance with a 10b5-1 plan as has been the case with most Apple execs. The biggest part of Mr. Cook's compensation comes in the form of a million RSUs that don't vest for 5 and 10 years. That creates leadership stability. That turns an eye toward the long term. That aligns his financial interests, to the extent he cares about them, with that of the shareholders - but in the long term not the short term. It does Mr. Cook little financial good to make decisions that inflate the stock price this week or this month or this year. The only thing he can do to improve his own financial prospects is to run the company well - to focus on the business, not the stock. If he does a good job, he'll be well rewarded down the road. If he doesn't, or if he leaves the company, he won't.
As for returning part of Apple's cash pile to investors, there's so much of it now that I don't mind them doing that with a small portion of it. But I'm not a big fan of trying to return a lot of it and I'm not a fan of stock buy backs (other than as maintenance of the number of shares outstanding, i.e. the relative ownership share represented by a share). Buy backs are for stock price manipulation. I don't need Apple to give me my money back, I can take it back at any time I choose and in whatever portion I choose. Stock buy backs actually take the decision away from the investor - it says, we're going to make your ownership of the company larger, now you have to sell a portion of your shares if you want to get back to what you were at. I'm also not a huge fan of dividends, but understand why many people like them and don't mind them so long as they are at a level such that they aren't likely to affect the business' operations or limit its future opportunities.
Now, Apple has plenty of cash - more than enough to feel safe in case of a rainy day (or decade
). But it's also been very successful in making small strategic acquisitions that have paid off in better and more popular products down the road. It's never been an acquirer for the sake of acquiring - for the sake of being bigger or controlling more market share. But who's to say that an opportunity down the road to make an important strategic investment (i.e. that improves what they do as opposed to gets them into entirely different businesses) won't present a high price tag? More importantly, a lot of Apple's cash is held overseas. The U.S. government doesn't want them to bring it to the U.S. and insists that it will punish Apple if it does so by levying a tax on the money they bring here. As an investor in Apple, I think it would negligent of Apple to bring cash here (for whatever use) as long as that is the case. That money was already taxed where it was made and in accordance with the laws in effect there. If Apple lets the U.S. government collect another round of taxes on it, and then I have to pay yet another round of taxes on it as it is distributed to me - that's triple taxation. It's crazy. I don't think Apple can, in good conscience, bring much of that money here. I hope it leaves it overseas and either lets it pile up or finds ways to make use of it there; at least until the U.S. wakes up and adopts sensible (and ethical) tax policies.The bottom line is that I have equity money invested in various businesses because I believe they will make good use of it. When I no longer believe that, I'm free to take my money out. That's how I weigh in on whether a company is being a good steward of its owners' interests. When it comes to a company like Apple, I'm happy that their stewardship of the same is focused on the long term. If others are not happy about that, if they want a company that focuses on short term stock prices - if they want a company that will do things meant to affect stock price rather than things that are best for the business - then I'd suggest they take their money out of Apple and put it in companies that do just that. They shouldn't have trouble finding them.
IMHO as it should be ....... this would be my problem with the entire Stock Market today
it is all about Short Term Profit from a rosy stock report
a company used to sell stock to raise capital ........ now everyone wants an IPO to get rich
Facebook -
Boston Market waz a flop - IIRC
Einhorn wins ruling against Apple in cash pile fight
(Reuters) - A U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with Apple Inc on Friday, blocking the iPhone maker from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.
U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping the vote on that proposal.
The vote was scheduled for February 27 as part of the company's annual stockholders' meeting.
Greenlight sued Apple on February 7 as part of a broader pitch to unlock more of Apple's $137 billion in cash for shareholders. Einhorn has argued Apple should issue preferred stock with a perpetual 4 percent dividend.
The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward that would eliminate Apple's power to issue preferred shares without a shareholder vote.
(Reuters) - A U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with Apple Inc on Friday, blocking the iPhone maker from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.
U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping the vote on that proposal.
The vote was scheduled for February 27 as part of the company's annual stockholders' meeting.
Greenlight sued Apple on February 7 as part of a broader pitch to unlock more of Apple's $137 billion in cash for shareholders. Einhorn has argued Apple should issue preferred stock with a perpetual 4 percent dividend.
The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward that would eliminate Apple's power to issue preferred shares without a shareholder vote.
Tilted
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My gut tells me that Judge Sullivan is probably technically right on the law, but Mr. Cook was right in describing this as a silly sideshow (I think those are the words he used). Mr. Einhorn didn't really win anything, he just caused a bit more work and expense for Apple (and I mean a small bit).
Here are the basics of what happened. Mr. Einhorn wants Apple to do things differently. He wants Apple to play the stock price game, which it's been relatively resistant to doing. I won't go into the specifics of what he wants Apple to do and what I think about the idea (unless someone is interested), but it would mean Apple issuing preferred shares.
The Apple Board had proposed a number of changes for shareholder vote that I would describe as being largely housekeeping in nature. Each of the proposals would easily pass individually, but there are SEC rules about not bundling separate matters in the same proposal - i.e. into one up or down vote by shareholders. In with the changes is the one that Mr. Einhorn doesn't want passed. It would eliminate the Apple Board's 'blank check' authority to issue preferred shares. The Board is proposing that it no longer have the authority to issue preferred shares (which would generally carry more rights than the common shares) without approval from common shareholders. It would still be able to issue such shares (though it seems to have no interest in doing so), but it would have to put such issuance to a shareholder vote. This is a change that would give more power to shareholders.
Mr. Einhorn doesn't want shareholders to have to approve such issuance because he wants preferred shares to be issued. He apparently thinks he'll have more luck convincing the Board to issue them than he would convincing shareholders. The thing is, the Board isn't going to issue them and Mr. Cook even said, in essence, in the last conference call - we aren't going to spend a lot of effort or resources trying to get this change passed because, even if we are left with the authority to issue preferred shares unilaterally, we feel strongly enough that shareholders should have a say in it that we'd put it to a vote anyway.
Mr. Einhorn has won a hollow victory. Apple has to pull this 'bundled' proposal from the upcoming shareholder meeting, so the changes won't be made now. It will either include them as separate proposals next year or (at an expense of a few million dollars) issue new paperwork and call for a special vote on them later this year. I suppose Mr. Einhorn may have bought himself another year to convince the Board to do what he wants, but it isn't going to do what he wants. In essence, he's saying - oh yeah, you don't want to do what I want, well I'm going to use the courts to force you to keep the power to do what I want, if you want to, for a bit longer even though you don't want to do what I want. It really is silly. Apple was trying to formally return certain power to shareholders. He blocked that on technical grounds late in the game so that Apple won't be able to return that power right now (at least not without added expense). But so what? Apple intends to effectively leave that power to shareholders whether it is required to or not.
greedy sot is trying to force Apple to make his stake better ?
challenging the Rule Changes ?
Tilted
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He challenged the process likely because he realized that shareholders would likely vote to give themselves final say on any new issuance of preferred shares as the Board proposed to do.
As I intimated earlier, we can walk through it in greater detail if you'd like. But the basic idea behind his preferred shares idea is that (1) the market isn't fairly valuing Apple stock based on the fundamentals and (2) the market would start doing so if Apple would, or trading purposes, break up constituent elements of those fundamentals - in essence, if Apple would just use an accounting gimmick to point out to the market that it isn't fairly valuing Apple stock.
It's quite silly to my mind, that is to say from the perspective of what I generally expect from an equity company (i.e. that, first and foremost, it's run to be a good business). The market already knows what the constituent parts of Apple's value are, it doesn't really need to be reminded. Sometimes stocks don't trade based on fundamentals, often technical forces dominate the price action. It is those technical forces (whatever they may be), or a generalized expectation that Apple's business will be deteriorating in coming years, that are driving Apple's valuation right now - not predominately fundamentals. What do you do if you're a fundamentals investor and you don't think the market is fairly valuing a company based on those fundamentals? Try to force the company to do things to make the market recognize those fundamentals (good luck with that)? Or take advantage of (what you believe to be) the market's missed valuation?