After being sued by one of its investors over demands that it should share more of its $137 billion cash pile to its shareholders, Apple has said it is "evaluating" the possibilities of doing so.
Manager David Einhorn of hedge fund Greenlight Capital, recently stressed that Apple had a "Depression-era" mentality, which made it hesitant to share its cash and generally play it safe. Einhorn stressed that the firm should distribute preferred stock to current shareholders, but Apple dismissed the idea when it was first discussed.
Einhorn added that while he understands why Apple maintains its large cash pile to be strategic, carry out acquisitions and be secure, he believes offering preferred shares to existing shareholders would allow Apple to share its cash while still boasting a substantial amount of its own.
In a statement, Apple stressed that it's aware that its cash has grown beyond what's required to run daily operations, but it's considering several possibilities in regards to sharing its $137 billion cash pile. Either way, even though it's no longer the world's most valuable firm, that amount has continued Apple's position as the world's richest company.
By early last year, Apple's cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.
We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.
Apple's management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital's current proposal to issue some form of preferred stock. We welcome Greenlight's views and the views of all of our shareholders.
As a part of our efforts to further enhance corporate governance and serve our shareholders' best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight's proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight's statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple's articles of incorporation provide for the issuance of "blank check" preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.
We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.