Apple's hedge-fund problem: Can the company remain independent?

As Apple's share price falls, hedge fund investors are getting restless

Apple CEO stops by a California store in October 2012: A major Apple investor is demanding compensation for falling shares.
(Image credit: Don Feria/Apple via Getty Images)

On Thursday, Greenlight Capital, a hedge fund that owns a major stake in Apple, sued the tech giant in an effort to force the company to share more of its wealth with shareholders. The move is the most dramatic evidence yet that hedge funds, which own a large chunk of Apple, are getting very anxious about Apple's falling share price, which has tumbled 35 percent since its peak in September.

The dispute centers on a seemingly narrow issue that has broad implications for Apple. The company wants to limit the issuance of preferred shares, a move that Greenlight manager David Einhorn strongly opposes. Where Einhorn and Apple differ most on the matter is over what Apple should do with its massive hoard of cash, which amounts to $137 billion. With Apple's share price falling, Einhorn is urging the company to essentially compensate its biggest shareholders, many of which, like Greenlight, saw the value of their investment plummet in the past four months. Einhorn claims that if Apple issued $50 billion in preferred shares, with a 4 percent dividend, investors would reap a gain of about $32 per share.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up
To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us