Cramer: What The Heck Was Einhorn Talking About?

After hedge fund manager David Einhorn defended his proposal on CNBC that Apple offer current shareholders perpetual preferred stock to deliver value and put their cash to work, Jim Cramer's immediate reaction was to ask, "What the heck was he talking about?"

"Sure, this is a way to bring out some value, but I want them to grow. I want them to do an acquisition and grow," Cramer said on "Squawk on the Street" Thursday morning. "If they increased the dividend, the stock would go up. If they buy back stock aggressively, the stock would go up."

"It's convoluted," Cramer said of Einhorn's proposal. "This is an interesting method of returning capital because it doesn't necessarily impact the cash position. It's convoluted because there are simple ways to embrace Apple, including dividends."

Einhorn defended his decision to file suit against Apple over a proposal to eliminate preferred stock. Einhorn urged shareholders to vote against the proxy, branding Apple's tactics as symptomatic of someone who has suffered a trauma.

"This is a great intellectual exercise and a novel idea, but I have a lot of novel ideas that would actually move the stock up because it would increase the growth rate," Cramer said. He suggested that his "novel" ideas to spur growth for Apple included a major acquisition, such as Twitter or Netflix, given their large cash position.

"I want growth, I'm sorry, I'm a traditional investor," said Cramer. "I have a suggestion for him: You can always sell the stock. If you don't like what they're doing, you can sell it."

"Where Einhorn is really right is that they are anti-shareholder friendly. Why isn't the dividend bigger? Why isn't the buyback bigger? Most companies would not accept the treasury stance of Apple, they would say it's just not good enough," Cramer said in the 'Mad Dash' segment later in the show. "What really worries me here is that their reaction is so bad to [Einhorn]. He's got an idea, put it up for debate."

"Intellectually, Apple's position can't be defended," he said.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from Squawk on the Street @ToscanoPaul

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Jim Cramer's Charitable Trust owns shares of Apple.