Success for Einhorn: Judge blocks vote on Apple's Proposal 2

Tim Cook faces interesting shareholder meeting next week


Hedge-fund manager David Einhorn has scored a technical victory in his fight to block Apple from amending its charter at next week's shareholder meeting.

Earlier this month, Einhorn filed his legal suit with another investor, claiming that Apple was showing a "depression era" attitude to money by amassing a cash pile of $137bn and refusing to funnel that cash back to shareholders. Einhorn wants the company to issues preferential shares, which he dubs iPrefs, with a guaranteed yearly return of 4 per cent to existing shareholders to reward investors.

Einhorn says that he pitched the idea to the Apple board in May, but Cupertino's kingpins rejected it in September and put together Proposal 2, a bundle of measures intended to limit Apple's ability to eliminate the power of the Board to offer preferred stock. At last week's Goldman Sachs investor's conference, Apple's CEO Tim Cook called the lawsuit "a silly sideshow."

Not so silly, ruled New York District Judge Richard Sullivan on Friday afternoon. The judge granted Einhorn's request for an injunction to stop the shareholder's vote on Proposition 2, saying that its scope was too broad and thus violated Security and Exchange Commission rules.

"The Court finds that Greenlight and Gralnick have demonstrated by a 'clear showing' that they have satisfied the elements for a preliminary injunction regarding Proposal No. 2," the ruling states.

"Accordingly, their motions regarding Proposal No. 2 are GRANTED, and Apple is HEREBY ENJOINED from (1) certifying or accepting proxy votes cast in connection with Proposal No. 2, (2) amending its Articles based on such votes, or (3) proceeding with its shareholder meeting in violation of SEC rules concerning Proposal No. 2."

The ruling will likely ruin Tim Cook's weekend and leave him facing a fractious February 27 meeting with shareholders, where Proposal 2 was to face a vote. That said, Einhorn doesn't have many shareholders on his side, according to recent reports, so this doesn't mean he's necessarily facing an iPref payday. ®

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