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Published 11 February 2013 12:11, Updated 10 April 2013 07:32
Billionaire investor David Einhorn says Apple has a “cash problem” and is “utterly misvalued”. Photo: Bloomberg
David Einhorn, the billionaire hedge fund manager famous for shorting Lehman Brothers stock in 2007 before the bank collapsed, and who subsequently bought a $200 million stake in American baseball team the New York Mets, is suing technology giant Apple for sitting on its cash.
In a television interview aired on American news network CNBC on Thursday, Einhorn, the founder of hedge fund Greenlight Capital, said that while he admires Apple, it has a “cash problem” that it needs to fix by giving away perpetual preferred stock with a 4 per cent yield.
Apple has been criticised by some money managers in recent years for holding too much cash on its balance sheet. It currently holds $US145 per share, or a total of $US137 billion of cash.
Apple’s stock has been heavily invested in by hedge funds such as Greenlight since it began trading at $US100 per share in 2009, to its highs of $US700 per share in 2012, a year after its founder Steve Jobs died following his well publicised battle with cancer.
Since September 2012 Apple shares have gradually fallen, losing more than $US200 per share in value. The stock was up slightly on the back of Einhorn’s comments.
In a statement Greenlight said it spent part of 2012 in discussions with Apple on the idea of perpetual preferred stock, but that the company rejected it last September. Perpetual preferred would give hedge funds holding the stock new securities to trade.
Einhorn told CNBC that Apple shares are “utterly misvalued” at current levels, arguing the company no longer needs to grow at the near-triple digit rates of the past.
Einhorn is frustrated that Apple is not leveraging its cash to help support its share price.
Greenlight also filed a lawsuit in federal court in New York on Thursday to force Apple to modify a proposal in its proxy, which the hedge fund believes does not conform to regulatory rules.
Einhorn claims that Apple chief executive Tim Cook is trying to make it impossible for the company to issue preferred shares, bundling a proposal to eliminate preferred stock with two other proposals that shareholders would find very easy to vote for – majority voting for directors and establishing a par value for Apple’s common stock.