How David Einhorn turned from Apple advocate to agitator

Feb 08 2013, 10:17 IST
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How David Einhorn turned from Apple advocate to agitator. (Reuters) How David Einhorn turned from Apple advocate to agitator. (Reuters)
SummaryEinhorn announced that he was suing Apple to get it to deploy its $137.1 billion cash.

led it to hoard cash and invest only in the safest, lowest-yielding securities.

"In other words, people who have gone through traumas...and Apple has gone through a couple of traumas in its history, they sometimes feel like they can never have enough cash," Einhorn said on CNBC.

Cook and Oppenheimer both joined Apple during the turbulent late 1990s when the tech company was struggling to stay afloat and before Steve Jobs engineered a sensational turnaround with products like the iPhone and iPad that became must-haves for consumers around the world.

Oppenheimer later earned a reputation on Wall Street for extreme conservatism in cash management. The company likes to remain liquid by investing in safe but low-yielding US Treasury and agency debt, shies away from big acquisitions, and repeatedly preaches a "capital preservation" mantra to investors.

Under Cook in 2011, Apple gradually loosened the reins, announcing its first multi-year dividend and share repurchase programs.

Einhorn and Apple will have another bout when they air their arguments on Feb. 22 in court. Before then, the outspoken fund manager will be lobbying other shareholders.

Analysts say one benefit of preferred stock is that up to 80 percent of the dividends can be tax-free for corporate investors, although preferred shares tend to be less liquid than ordinary shares or bonds.

"The idea is powerful and when I have a chance to explain it to the shareholders, most will see it as an enormous win-win," Einhorn said.

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