More investors oppose Einhorn in Apple fight


Is a backlash brewing against David Einhorn? Has he made a tactical mistake in suing Apple in his quest to force it to issue high-yielding preferred shares?

These questions are timely after a recent letter sent to Einhorn by one of his former limited partners. As noted by the Financial Times, the Nathan Cummings Foundation wrote that "By threatening to disenfranchise Apple shareholders, Greenlight Capital has acted in a manner that is not consistent with our understanding of Greenlight Capital's own orientation and investment philosophy."

At the same time, CalPERS, the hugely influential pension, has surveyed other large investors and found that the "overwhelming majority" support Apple management in its bid to get rid of the company's right to issue preferred shares without approval from common shareholders.

Einhorn  has gone to court to block the move, thinking that it will make it harder for him to force the company to issue preferred shares.

There are two separate issues here. The corporate governance issue, on which shareholders seem to support management, and the preferred shares issue, which investors may or may not support.

These issues have been unfortunately conflated, posing some risks for Greenlight Capital. It certainly does not want to open itself up to charges that it self-serving and all too willing to sacrifice agreed-upon good corporate governance practices in pursuit of its narrow interests. That said, Apple is keenly aware that its growing cash hoard represents a mountain of controversy, especially with the stock flagging.

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