Court injunction to block Apple’s controversial vote on preferred stock

Hedge fund manager David Einhorn yesterday won the first round of court battle against Apple Inc after a Manhattan court granted a preliminary injunction stopping the technology giant from going ahead with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

Following the ruling, Apple said it would not put the proposal for its shareholder meeting, but will now press the management to return to investors some of its $137.1 billion cash hoard.

The core of the battle lies where certain investors of the company feel that Apple should part with its massive cash reserves to investors. Einhorn's Greenlight Capital Inc, an investor with more than 1.3 million Apple shares, had argued that Apple should issue preferred stock with a perpetual 4 per cent dividend.

Apple submitted proposal No. 2 on its annual proxy that, if passed, would require shareholders to vote on any plan to issue the stock Einhorn wanted. Apple improperly bundled the vote with other unrelated issues, which led to Einhorn and a few other investors filing the suit to block the shareholder vote.

Giving his reasons for issuing a preliminarily injunction on blocking the vote until the suit is heard, the US District judge in Manhattan wrote in his ruling that the proposal "impermissibly bundles 'separate matters' for shareholder consideration," the judge said.

He gave both sides until 1 March to come up with next steps in the case.