Apple accused an activist hedge fund manager of attempting to hold investors "hostage" in his effort to get the electronics giant to share more of its massive cash reserves with investors.
The charge came today in Apple's response to a lawsuit filed last week by Greenlight Capital, which asserts that the company needed to distribute preferred stock to current shareholders and that Apple had balked at the idea when it was first discussed. The filing comes a day after Apple CEO Tim Cook called the lawsuit a "silly sideshow."
"Shareholders should not be held hostage to plaintiffs' attempts to coerce Apple into an agreement that serves plaintiffs' financial interests," Apple said in its 27-page response (see below), adding that "the proposed injunction would harm the public interest."
Apple's latest proxy statement, which details items up for a vote at its February 27 shareholder meeting, includes a proposal that would eliminate "blank check" preferred stock. Greenlight Capital, which is run by the famed short seller David Einhorn, seeks an injunction to prevent Apple from bundling that provision with several other items. He wants each item to be voted on separately.
Apple claims in its response that the proposal does not constitute "improper bundling" because though the proxy identifies separate aspects of the proposal, shareholders are being asked only whether to amend the articles.
"There are numerous examples of proxy proposals that combine multiple changes to a single corporate document, including elimination of the 'blank check' authority to issue preferred stock," Apple stated.
Apple also called the suggestion of issuing an amended proxy "unworkable" because it would impose "millions of dollars" in administrative costs and delay a shareholder meeting.
"In short, plaintiffs cannot show any hardship of not obtaining injunctive relief, much less hardship that is greater than the financial harm to Apple and its shareholders of not having Proposal No. 2 put to a vote," Apple said in its filing, which noted that the proxy filing was submitted to the Securities and Exchange Commission for review but raised no red flags.
Apple Chief Financial Officer Peter Oppenheimer stated in a court declaration that during a conference call on February 6 Einhorn referred to the necessity of shareholder approval for issuance of new stock a "roadblock" that would just "make it harder." Einhorn said during the call that he wanted to "take the risk away," Oppenheimer said.
CNET has contacted Greenlight Capital for comment on the filing and will update this report when we learn more.
Einhorn has described Apple as a phenomenal company but one that's too cautious with its cash.
"It has sort of a mentality of a depression," Einhorn said during a CNBC interview last week. "In other words, people who have gone through traumas -- and Apple's gone through a couple traumas in its history -- they sometimes feel they can never have enough cash."
Speaking during a Goldman Sachs conference in San Francisco yesterday, Cook disputed those claims and said the company makes "bold and ambitious" bets on products while being conservative financially. He noted that Apple invested about $10 billion in capital expenditures last year and that it will spend a similar amount this year along with investing in retail stores, distribution, R&D, supply chain, and acquisitions.
"I don't know how a company with a Depression-era mindset would have done all those things," Cook said.
The company has defended its management of its cash reserves, which totaled more than $137 billion in cash and securities as of December, saying it has already delivered $10 billion of its plan to return $45 billion to shareholders over three years. It reinitiated a dividend last year and also has plans to buy back stock.