A federal judge in New York said he would rule on Greenlight Capital Inc.’s bid to stop Apple Inc. from adopting measures the hedge fund says limit the iPhone-maker’s ability to offer preferred stock before a Feb. 27 shareholder vote.
Greenlight, whose founder, David Einhorn, has been urging Apple to share cash with investors by issuing high-yielding preferred shares, alleged in a lawsuit that the company unfairly lumped a stock restriction with two other corporate governance matters set for a vote by investors on Feb. 27.
U.S. District Judge Richard Sullivan in Manhattan yesterday declined to rule from the bench on Greenlight’s request to block the vote unless Apple allows the provisions to be considered separately.
Greenlight may have shown a likelihood of “success on the merits,” he said. He added that the “focus is on irreparable harm” and questioned whether the hedge fund would necessarily be harmed if Apple moves forward with the vote.
Apple’s lawyer, George Riley, said Greenlight probably wouldn’t be harmed at all if the vote favors Apple.
“It seems to be Mr. Riley has suggested a scenario where the court doesn’t have to do a darn thing and you haven’t rebutted it,” Sullivan told Mitchell Hurley, the lawyer for Greenlight.
Earlier in the hearing, Hurley had said Greenlight “will be harmed immediately and irreparably because it will be forced to vote against its own interests.”
Responding to Sullivan’s queries, Hurley said “it’s not clear what position Greenlight will take” if the measure is rejected. “But they will be harmed,” he said.
Einhorn, whose Greenlight claims to hold more than 1.3 million Apple shares, has been asking the Cupertino, California-based iPad maker to issue preferred stock to help shift the value of a $137 billion stockpile of cash to investors.
Apple Chief Executive Officer Tim Cook has said the company is considering ways to give more money to shareholders and described Greenlight’s suit as a “silly sideshow” during a Feb. 12 investor conference in San Francisco.
Riley told the judge during the hearing yesterday that the injunction requested by Greenlight “would be an unprecedented intrusion” in the voting process.
“I don’t see the slippery slope or the dangerous precedent you do,” Sullivan said in response.
Along with the preferred share proposal, Apple is seeking votes on measures that would facilitate majority voting in director elections and establish a par value for the company’s common stock. Hurley said Greenlight supports those measures and would like to vote on them separately.
Apple said in court filings that the preferred share item wouldn’t prevent it from offering that category of shares, only ensure that they couldn’t be issued without investor approval.
The company said it “strongly believes that the issuance of preferred shares, which can dramatically subordinate the rights of common shareholders, should be subject to approval by those common shareholders.”
Erik Gordon, a business professor at the University of Michigan in Ann Arbor, said the dispute “has taken on the flavor of Tim Cook showing that nobody pushes him around just because he’s not Steve Jobs.”
“Apple hasn’t given any logical reason the measures should be bundled and could have easily unbundled them,” Gordon said in an e-mail. “But, as a matter of policy, courts give companies wide latitude to decide these sorts of things.”
The case is Greenlight Capital LP v. Apple Inc., 13-cv-00900, U.S. District Court, Southern District of New York (Manhattan).