updated 04:40 pm EST, Fri February 22, 2013
Measure must now be excluded from shareholder meeting
[Update: Apple pulls measure, issues statement] US District Judge Richard Sullivan has ruled in favor of Greenlight Capital, and issued an injunction against an Apple shareholder vote on issuing preferred stock, Reuters reports. The proposal was to have been brought up at Apple's annual shareholder meeting on February 27. Greenlight is pursuing a lawsuit against Apple in the belief that if passed, the measure would prevent a preferred stock plan it wants from being considered.
Apple CEO Tim Cook has called the case a "silly sideshow," and argued that the measure would benefit shareholders since it requires their vote on issuing preferred stock. The head of Greenlight, David Einhorn, has claimed that the proposal violates SEC rules about bundling multiple proposals together; Apple insists that the SEC has already reviewed the matter.
At stake is Apple's $137 billion in cash reserves, which people like Einhorn have argued should be used in part to reward investors. The company has already begun limited dividend and stock buyback programs, and suggested that it might consider going further, but in the past has claimed the need to keep money in reserve for corporate acquisitions, economic slumps, and other potential costs. Paying for Einhorn's scheme would require Apple to repatriate some of its overseas cash, taking a hit in US taxes.
[Update] In reaction to the court decision, Apple has opted to pull the contested proposal, known as Proposal #2, from the ballot to be presented to shareholders at the annual meeting. As a result, the option to issue or not issue so-called "preferred stock" continues to rest solely with the discretion of Apple's board per the company's original charter.
Apple issued a statement on the matter, saying it was "disappointed" with the court's ruling. "Proposal #2 is part of our efforts to further enhance corporate governance and serve our shareholders’ best interests," the company said. "Unfortunately, due to today’s decision, shareholders will not be able to vote on Proposal #2 at our annual meeting next week."