Apple initiated a dividend and stock buyback program in March 2012, announcing it would return $45 billion in cash to shareholders over a period of three years. While that seems like a lot, it's still not enough for some shareholders, including Greenlight's Einhorn.
Einhorn recently held a conference call to discuss his idea of returning more cash to shareholders, in the form of a perpetual preferred stock.Dubbed 'iPrefs', Einhorn wants Apple's management to issue preferred stock yielding 4% that would be able to unlock the value of Apple's vast balance sheet, without it actually having to use its $137.1 billion cash haul. Einhorn believes the market is not giving credit to Apple's cash hoard, of which more than $94 billion is overseas. CEO Tim Cook and his team have hinted in that they would return more cash to shareholders, albeit in the form of a common stock dividend. In the company's recent first-quarter conference call CFO Peter Oppenheimer said that Apple does "consider increasing these programs and we'll do what we think is in the best interest of our shareholders." Several analysts, including Jefferies' Peter Misek, believe Apple will do something with its cash, but not iPrefs. "While the concept of iPrefs as coined by Greenlight is certainly very intelligent, it handcuffs Apple in a way that we believe the Company cannot do," Misek wrote, in a note. Misek cited a smaller screen size, lower margins, and capital spending as a reason for Apple not doing iPrefs. Misek rated Apple "hold" with a $500 price target. Misek also noted he thinks Apple could double its return of cash to shareholders, moving from $45 billion to $90 billion. An alternative would be to change the time frame. Apple said it would return $45 billion over three months, but Misek suggested decreasing the time to 18 months. Barclays Capital's Ben Reitzes believes that Apple "has room to increase its total cash outlay for dividends and buybacks by 30-40% over the next 3 years without having to access overseas cash." He believes that an additional return of cash to shareholders will be a positive catalyst for the stock in the first half of this year. There were rumors of a stock split floating around Twitter yesterday, with TheStreet's Doug Kass tweeting he heard Apple will announce a stock split.
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