David Einhorn tried to dissuade Apple Inc last week from eliminating its
ability to issue preferred shares at will, saying the need to first
obtain shareholder approval would be an unnecessary roadblock to any
such future plans, the iPhone maker said in a court filing on Wednesday.
Chief Financial Officer Peter Oppenheimer described in the filing how,
during a discussion with Einhorn and Apple CEO Tim Cook on February 6,
Einhorn opposed the so-called "Proposal No. 2", which would remove an
existing system for issuing preferred shares at the company's sole
discretion, without having to get shareholders' approval.
"viewed requiring shareholder approval for his proposal as a 'roadblock
that was not needed'," Oppenheimer declared in the filing. "He said that
he wanted to 'take the risk away' of a shareholder vote and asked 'why
make it harder?'
"We told Mr. Einhorn that Apple was considering
his proposal, but that the Board would not issue his proposed perpetual
preferred shares without shareholder approval," Oppenheimer added in his
Einhorn did not immediately respond to requests for comment.
Greenlight Capital sued Apple last week in U.S. District Court in
Manhattan, hoping to block a February 27 shareholders' vote on Proposal
Instead, Einhorn wants Apple to issue perpetual preferred
stock with a 4 percent dividend to existing shareholders, part of his
broader pitch for the company to send more of its $137 billion cash
hoard investors' way.
Apple has said it will carefully consider that "creative" idea.
Wednesday's motion, Apple also challenged Einhorn's assertion that it
had "bundled" three different proxy proposals into one, in violation of
U.S. Securities and Exchange Commission rules.
Proposal No. 2 also
seeks to amend Apple's articles of incorporation by providing for
majority voting for directors, and establishing a par value for Apple
"Bundling occurs when discrete, material proposals are
combined in a manner that puts shareholders to an unfair choice," Apple
said. "That is not the case here."
Apple said in Wednesday's
motion it had initiated the proposal in response to a report by
influential proxy adviser Institutional Shareholder Services. The firm
said this week that so-called "blank check" preferred stock issued
without shareholder approval could be abused as a takeover defense.
report reflected a view widely held by shareholder advocates that
corporate boards should not have 'blank check' authority to issue
preferred shares," Apple said.
A hearing in the case is scheduled for February 19.
The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.
© Thomson Reuters 2013