Activist US hedge fund manager David Einhorn has filed a lawsuit against Apple to try to force it to dispense some of its massive cash hoard to shareholders. Einhorn, who owns Green Light Capital, says that the consumer electronics giant is exercising a ‘Depression era’ mindset by holding onto the cash, and thinks that the company does not need to play it safe to such an extreme.
In an interview with CNBC, he said: ‘It has sort of a mentality of a depression. In other words, people who have gone through traumas…and Apple has gone through a couple of traumas in its history, sometimes feel like they can never have enough cash.’
He is also concerned that the company will not pay out before it’s market capitalisation shrinks significantly. In September last year, Apple had a brief stint as the world’s largest company by market cap, and in cash terms it was also the largest company in history. But since then, the iPhone 5 has not performed as well as expected and shares have dropped a massive 35%. That is somewhere in the region of $200bn lost from its value.
Still, Apple has been notoriously tight with its savings ever since Steve Jobs came back on board after his ‘sabbatical’ from the company. He was reportedly so scared of the prospect of Apple running out of money again (like it nearly did in the ‘90s) that he thought best to save tens of billions of dollars for a rainy day.
But Einhorn says he has contacted Apple’s CEO, Tim Cook, after failing to get any traction with the chief financial office, Peter Oppenheimer. He is proposing that the company releases ‘preferred’ stock to shareholders, a mechanism which means investors would be paid a fixed dividend over time.
We doubt the firm will just splash out on a big dividend any time soon, but CEO Cook might be trying to think of a far more productive way to spend some of that cash and keep his shareholders happy…