David Einhorn’s call for Apple Inc. to distribute preferred shares to the iPhone and iPad maker’s investors is at odds with a growing tendency for companies to shun this form of equity.
As the CHART OF THE DAY illustrates, the number of companies in the Standard & Poor’s 500 Index with preferred stock outstanding fell in every year but one during the past decade and a half. The exception was 2009, when several banks sold the shares to raise funds after a financial crisis.
Sixty-three companies in the S&P 500 have preferred stock, according to data compiled by Bloomberg from their most recent financial statements. The total fell from 164 companies at the end of 1997, the year when Apple sold convertible preferred shares to Microsoft Corp. for $150 million.
Microsoft converted its stake into common stock within four years. Apple hasn’t had any preferred equity since then, and the Cupertino, California-based company would lose the ability to issue new shares under a proposed amendment to its charter.
“They’re just getting rid of a relic,” Brian Barish, president and chief investment officer of Cambiar Investors LLC, said yesterday in a phone interview. Barish’s Denver-based firm manages about $7 billion.
Einhorn urged Apple’s investors to oppose the charter change and support a preferred-stock distribution in a letter sent yesterday. Greenlight Capital Inc., a New York-based hedge fund where he serves as president, filed a lawsuit that alleges the company improperly combined the amendment and two unrelated proposals for a shareholder vote on Feb. 27.