Apple Pushes Back Against Einhorn Allegations of Cash Hoarding
Apple pushed back against a fund manager's accusations that it adhered to a Depression-like mentality of hoarding its excess cash.
Fund manager David Einhorn appeared on CNBC to renew a frequent complaint against the cash-rich technology giant: that it needs to find a way to distribute its cash to shareholders.
In an interview on "Squawk Box," Greenlight Capital's founder defended his decision to file suit against Apple over a proposal that Einhorn asserts will eliminate the option of preferred stock. Einhorn urged shareholders to vote against the proxy, branding Apple's tactics as symptomatic of someone who has suffered through money troubles.
The tech behemoth responded in a statement Thursday afternoon to Einhorn's charges, saying it was in "active discussions" about how to return money to its investors. The company added that it would "thoroughly evaluate" Greenlight's ideas, and was "committed to having an ongoing dialogue" with investors.
Yet Apple rejected the idea that its proposal would prevent the issuance of preferred stock. "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."
Einhorn, however, insisted to CNBC that "Apple has a problem, we think. It has a cash problem."
Investors and analysts have frequently taken aim at Apple's refusal to distribute its sizable pile of cash. The company amassed $23 billion in operating cash in its latest quarter, ending the period with a whopping $137.1 billion in net cash.
Likening the company's behavior to his grandmother's parsimony, Einhorn said Apple is acting like "someone who's gone through traumas … they sometimes feel they can never have cash."
Einhorn's critique echoed that of Topeka Capital Markets. In a research note last month, the firm said Apple was "clearly undergoing a shift in its shareholder base; however, we believe a much more significant return of cash is necessary to attract more value-oriented investors."
Greenlight's Einhorn said that he understood Apple's impulse to keep cash in the event of a rainy day, and its need for "strategic flexibility and comfort money."
However, he added, "at the same time shareholders can receive the value that is embedded in the balance sheet."
Apple shares jumped 3 percent in regular trading Thursday but were little changed in after-hours trading. Click here for the latest quote.