Einhorn Push for Apple Cash Drives Structured Note Sales Rebound

Banks sold the most U.S. structured notes tied to the price of Apple Inc. (AAPL) shares last month since December as the company said it would announce plans for its growing pile of cash.

Investors bought $102.2 million of the securities in 16 offerings, about three times as much as the $34.4 million in February, according to data compiled by Bloomberg. The stock gained 0.3 percent in March after dropping for five straight months.

Expectations that Apple will return some of its $137.1 billion in cash to shareholders rose last month after increasing pressure from investors, most notably Greenlight Capital Inc. President David Einhorn. Tim Cook, Apple’s chief executive officer, said in February that he is in “very, very active” talks about what to do with the company’s surplus.

“With the fall in growth expectations and the increased discussion of dividends, it started to potentially attract a different, value-focused investor base,” said Walter Piecyk, an analyst at BTIG LLC in New York. He raised his recommendation on the stock to “buy” from “neutral” last month, with a 12- month target price of $540.

Apple shares have dropped almost 40 percent from their Sept. 19 high last year, to $435.69 yesterday. The Cupertino, California-based company plans to release its earnings report for its second fiscal quarter on April 23.

Biggest Sale

The largest offering tied to Apple last month was $40.2 million of one-year notes issued by Royal Bank of Canada. (RY) The securities, sold March 28, yield 8.5 percent a year and pay an additional 5.61 percent if the stock rises at least 8.5 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission. Bank of America Corp. distributed the notes, which RBC initially valued at 97.4 cents on the dollar, for a 1.75 percent fee.

Kait Conetta, a spokeswoman for the Canadian bank in New York, declined to comment.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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