Apple responds to Greenlight Capital’s proposal regarding Apple’s cash balance and stock

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Apple has responded to Greenlight Capital’s proposal regarding the issuing of preferred stock, and the stock market has reacted extremely favorably (above):

CUPERTINO, Calif.–(BUSINESS WIRE)–By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.

We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.

Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock. We welcome Greenlight’s views and the views of all of our shareholders.

As a part of our efforts to further enhance corporate governance and serve our shareholders’ best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight’s proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple’s articles of incorporation provide for the issuance of “blank check” preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.

We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.

Greenlight Capital founder David Einhorn appeared on “Squawk Box” today to defend his decision to file suit in New York federal court against Apple over a proposal, dubbed “Proposal 2,” that would allegedly stamp out preferred stock in the company’s proxy, claiming the proposal does not adhere to regulatory rules…

However, in Apple’s response statement, the company said, “contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock.”

During the CNBC interview, Einhorn called Apple a “phenomenal company filled with talented people creating iconic products that consumers around the world love,” but it also has “cash problem” and behaves like ”someone who’s gone through traumas…they sometimes feel they can never have enough cash.”

Apple’s stock price has jumped on the announcement:

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