Greenlight Capital offensive might expand to other tech companies
What's behind Greenlight Capital's aggressive stance on Apple and the board's ability to create alternative classes of preferred shares?
It may owe just a bit to the somewhat surprising low returns the fund generated in 2012. The Financial Times notes that Greenlight limited partners earned 7.9 percent in 2012, well below its average annual return of 19.4 per cent, after fees and expenses since David Einhorn founded the company in 1996.
It reports that, "Mr. Einhorn's response to the setback was typical for a man who last year reacted to a stinging £7.2m fine for market abuse by the UK's Financial Services Authority by holding a press conference to castigate the authorities over the case he had just settled: He attacked."
Einhorn is certainly accustomed to staking out controversial positions and doing what he can to publicize them. In this case, he could be laying the groundwork for similarly aggressive attacks on other cash-rich technology companies. If he succeeds in getting his preferred shares, why wouldn't he seek such shares at other companies that fit the profile? Microsoft comes to mind.
That said, investors aren't necessarily applauding his every move in this area, and proxy advisory firm ISS has come out in support of Apple's attempts to modify its charter to make it less likely that it will issue preferred shares without first seeking common shareholders' approval. CalPERS also supports the company on this issue.
"Moreover, should the board decide at some future date that an issuance such as Greenlight has proposed makes sense, and can demonstrate the benefit to shareholders, obtaining the requisite shareholder support to reinstate the provision is not likely to be an insurmountable obstacle," ISS said in a research note, as noted by Reuters.
Is Einhorn's suit against Apple epic or humdrum?