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Unrest boils at annual shareholder meeting, but things remain civil

Apple, Inc. (AAPL) CEO Tim Cook won reelection to Apple's Board of Directors by a 99.1 percent vote.  Apple is enjoying record profitability and is rumored to be working on a new project -- a smart watch.

I. Cook Acknowledges Disappointing Share Prices Amid Lawsuit

And yet share prices have been on a downward slide, dipping as "low" as $435 USD per share in recent weeks.  Some investors are worried that future Apple products won't be as big hits as the iPhone and iPad; others are angry that Apple is sitting on $137B USD in cash and securities, yet is failing to grow share buyback and dividends at an equivalent pace.

At the annual shareholder meeting, Tim Cook tried to placate his critics, arguing he was as mad as the next guy about low share prices.  He comments, "I don't like it either. The board doesn't like it. The management team doesn't like it.  What we are focused on is the long term. This has always been a secret of Apple."

Tim Cook
Tim Cook claims he shares shareholders pain about dropping stock prices.
[Image Source: Bloomberg]

Such a frank acknowledgement still sounds strange coming from Apple.  Mr. Cook's predecessor, the late Steve Jobs typically would refuse to apologize for anything.  By contrast, since taking the reins, Mr. Cook has been "all apologies" as the Nirvana song goes.

In a way that makes sense.  Mr. Cook himself was awarded one million restricted stock units last year (worth around $450M USD at current share prices); that fortune is hurt by low share prices, but could be boosted if share prices go back on the uphill climb.

However, top shareholder David Einhorn, who manages Greenlight Capital Re., Ltd. (GLRE), made a powerful statement by refusing to show up at the meeting.  Last Friday his firm scored an injunction invalidating a shareholder vote to scrap a proposal for Apple to issue preferred stock at its discretion.

Mr. Einhorn is pressuring Apple to "share the love", so to speak, by issuing preferred stock shares that would yield a fixed 4 percent annual dividend.  He claims his so-called "iPref" proposal would reward Apple's investors with more profit sharing, while not diluting the primary pool of shares.

II. Shareholders Stay Civil, But Send a Message to Apple

Shareholders flexed their muscle on other issues as well.  The shareholders ratified a proposal that would force Apple executives to hold more stock, which could push them to share more profit.  They also passed a measure that will force the company to commit a board committee on human rights, which will investigate allegations of abuse at the factories that make Apple products in China.  Apple opposed both proposals.

On the same note, Apple many shareholders voted against a pay raise for top executives, including Tim Cook.

California Public Employees Retirement System (CPERS), a large institutional Apple investor, voiced support for Mr. Einhorn's iPrefs proposal -- also known among shareholders as "Proposal 2".  Senior Portfolio Manager Anne Simpson said it was unfortunate that the issue was not put to a vote at the meeting.  She is quoted as saying, "We know there is hot debate going on with cash.  We are willing and happy to wait."

David Einhorn
Top Apple shareholder David Einhorn (manager of Greenlight Capital) is leading a push to force Apple to open up its treasure chest. [Image Source: Value Walk]

Tim Cook acknowledged the measure was being considered, while arguing that Mr. Einhorn's lawsuit to force the issue was a "silly sideshow".

While the mood was tense during the meeting, it remained mostly civil and there were moments of levity.  One shareholder pointed out that the Santa Clara, California Apple store lacked a bathroom.  Tim Cook agreed that was a problem and promised to look into it.

Sources: Reuters, Forbes



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This article is over a month old, voting and posting comments is disabled

Apple is still overvalued
By GatoRat on 3/1/2013 11:43:36 AM , Rating: 2
Yes, I know what the numbers say, but my gut feeling is that Apple can't sustain the revenue stream they currently have. The problem with going short isn't that the stock price will drop, but when. (The same applies to Amazon, which is extremely overvalued.)




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