Whatever you think of David Einhorn — and in general I'm not a big fan of short-sellers who go around talking publicly about the problems with stocks they are shorting — it sure looks like he's playing a constructive role in his intervention with Apple.
It's been reported that Mr. Einhorn's hedge fund owns about 1.3 million shares of Apple, or a little more than $600 million worth. The interesting thing about the situation is that, according to Apple's latest proxy statement, all of Apple's current executive officers and directors (including Al Gore) own a mere 578,696 shares in the company, valued today at around $275 million.
And yet Mr. Einhorn, who owns more of the company than management does, has to sue them or make a big public fuss to get them to do what he wants with the extra cash.
There are a lot of companies out there like this, where the management owns a trivial percentage of the company, and is less than totally responsive to the shareholders who own more than they do.
One way to respond to this situation is by changing the rules to make it easier for shareholders to get proxy votes. Critics worry that the result of this would be a lot of activism by pension funds controlled by labor unions or Democratic state politicians. But once people get a sense, through the work of investors such as Carl Icahn or Mr. Einhorn, of what is possible, even under the current rules, they may take a different view of it.
In any case, if any of the many people who go around complaining that hedge fund managers provide no value to society own Apple shares that are up in the last few days in response to the prospect that Mr. Einhorn has a better idea for using the company's cash than does the company's management, they may want to rethink their view of things. Mr. Einhorn has increased the value of their Apple shares even though they haven't invested in his hedge fund or paid him a cent in fees.
Disclosure: I own some Apple shares, and this post was written on an Apple MacBook Pro connected to the Internet wirelessly via an IPhone.
