US judge rules in favor of Greenlight Capital’s suit to block vote on proposal number two, saying Apple’s bundling violates SEC rules
Apple has called off a vote planned for this week’s shareholder meeting that could have limited the creation of dividend-paying preferred stock, after a federal judge blocked Apple from bundling the proposal with two other items.
‘We are disappointed with the court’s ruling. Proposal number two is part of our efforts to further enhance corporate governance and serve our shareholders’ best interests,’ Apple says in a statement after the ruling, referring to the second of three proposals, which would eliminate issuance of preferred shares without a shareholder vote.
‘Unfortunately, due to today’s decision, shareholders will not be able to vote on proposal number two at our annual meeting.’
The ruling was in response to a suit filed early this month by activist investor David Einhorn, president of the Greenlight Capital hedge fund, who has been pressing Apple to distribute more of its $137 bn cash by issuing dividend-paying preferred stock.
Einhorn argued that Apple violated SEC rules by bundling its vote on preferred shares with proposals that would have established a par value for Apple stock and instituted majority voting for directors.
‘Given the language and purpose of the rules, it is plain to the court that proposal number two impermissibly bundles ‘separate matters’ for shareholder consideration,’ US district judge Richard Sullivan wrote in his order blocking Apple from moving ahead with the bundle.
‘The present bundling of items forces shareholders… to approve or disapprove a package of items and thus approve [or disapprove] matters they [would] not if presented independently.’
Apple had earlier accused Einhorn of holding other shareholders ‘hostage’ to gain financial advantages for his hedge fund and argued that unbundling the proposals was ‘unworkable because it would impose significant administrative costs. Apple would have to send a supplementary proxy to all shareholders, an exercise costing millions of dollars, and delay its annual shareholders’ meeting.’
‘This is a significant win for all Apple shareholders and for good corporate governance,’ Greenlight Capital, which owns 1.3 mn Apple shares, says in a statement after the court decision. ‘We are pleased the court has recognized that Apple’s proxy is not compliant with the SEC’s rules because it bundles different matters in proposal two.’
Greenlight Capital initiated the suit last week in an attempt to force Apple to hold a separate vote on its plan to limit the issuance of preferred stock.
In response to the suit, Apple highlighted its plan, announced last year, to distribute $45 bn to shareholders over a three-year period – $10 bn of which will have been distributed by the end of this month.
