David Einhorn Wins Right to Be Properly Ignored by Apple

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Einhorn.
Einhorn. Photo: Anthony Causi/Icon SMI/Corbis

There are two types of people in the world: people who understand hedge-fund manager David Einhorn's case for Apple to forestall a shareholder vote changing its corporate charter to prevent it from drawing down its massive cash pile by issuing dividend-paying preferred stock, and therefore understand why it's a big deal that a federal judge just ruled in Einhorn's favor, and people who stopped reading this sentence thirty words ago.

Assuming that you're not fascinated by Apple's latest corporate governance flap – if you are, go here, and then take a walk outside or something – here is all you need to know:

Apple has a lot of money – $137 billion, at last count. David Einhorn, a very rich hedge fund manager who owns Apple stock, wants it to give some of that money to shareholders like him through a fancy bit of financial engineering that involves issuing perpetual preferred stock. (He calls this preferred stock idea "iPrefs," because he is corny.)

Apple, though, has proposed changing its charter to prohibit itself from issuing the kind of preferred stock Einhorn wants. Shareholders are supposed to vote on it next week. Furthermore, it jumbled that no-preferred-stock proposal together with a bunch of other proposals, and asked shareholders to vote on the entire package at once. Einhorn got mad and sued Apple, on the grounds that asking shareholders to vote on a bunch of unrelated things all at once is not exactly good corporate governance, and now – just this afternoon – a judge granted his injunction.

Now, Apple shareholders might, at some indeterminate point in the future, be allowed to vote on the preferred stock amendment on its own. Maybe they'll even vote it down, sending a clear message to Apple's board: We want iPrefs!

But that still doesn't mean Apple will issue iPrefs — just that its board will be allowed to do so if it wants, which it doesn't. In fact, Apple has made it pretty clear that it's not going to issue preferred stock, and that it's just humoring Einhorn until he goes away. (CEO Tim Cook called the iPrefs thing a "silly sideshow.")

So, after the shareholder vote, Apple will continue hoarding its cash, Einhorn will keep being a gnat on Tim Cook's ear, and Earth will keep spinning on its axis until such time as it sees fit to stop. There, now you know how it ends.