In Apple Fight, Einhorn Unveils ‘iPrefs’

4:30 p.m. | Updated Apple Inc. has introduced more innovative consumer products than perhaps any other company has in the last decade: the iPod, the iPhone, the iPad.

David Einhorn, president of Greenlight CapitalEduardo Munoz/Reuters David Einhorn, president

Now the hedge fund manager David Einhorn wants the company to roll out what he calls iPrefs, which he says could produce $61 a share in additional benefits for investors.

It’s a cutesy name for the class of perpetual preferred shares that Mr. Einhorn has called on the technology giant to roll out as a way to deliver more cash to its shareholders. And for over an hour on Thursday, Mr. Einhorn, the president of the hedge fund Greenlight Capital, patiently walked listeners through his argument about why those securities made the most sense for returning the company’s $137 billion cash hoard to what he said were its rightful owners.

Flipping through a voluminous PowerPoint presentation, Mr. Einhorn argued that his idea bore merit and deserved shareholder support. He also explained how iPrefs work: Apple would issue one preferred share, carrying a quarterly dividend of 50 cents each, for each outstanding common share.

He conceded that the idea was unusual. But he argued that it was a fresh way to reward shareholders while letting Apple hold on to a still-substantial “rainy day” fund.

“We know they embrace innovation and can recognize it when they see it, even if it isn’t the kind of innovation people usually think of when they think of Apple,” Mr. Einhorn said.

“We hope Apple agrees with us when we say that iPrefs are an innovative idea whose time has come,” he added

The conference call came after several current investors in Apple and a former one in Greenlight called on Mr. Einhorn to halt his fight, which has included suing Apple for what the hedge fund manager called an improper bundling of several shareholder initiatives. The proposal on Apple’s proxy includes the elimination of the company’s ability to issue preferred shares without shareholder consent.

The California Public Employees’ Retirement System, the big pension fund, has urged shareholders to support the so-called Proposal 2, arguing that it actually promotes good corporate governance.

“I came off the call deeply puzzled,” Anne Simpson, the pension fund’s director of global governance, told DealBook in an interview after the call. “He finished off by saying you should vote against Proposal 2 to send a message, but he’s in court trying to prevent Proposal 2 from going ahead.

Calpers had been actively soliciting shareholder support for the corporate governance changes since before Mr. Einhorn filed his suit and believes the proposal will pass handily.

Ms. Simpson is undecided about the merits of the hedge fund manager’s idea, but she took issue with the idea of a big, distracting fight with a company that has already said publicly that it was considering the concept.

“This is really about proper conduct,” she said. “I don’t feel happy that activist funds can use disruptive tactics when the company says that they’re listening and willing to meet.”

And Richard Clayton, the research director of the CtW Investment Group, which represents several unions’ pension funds, added, “What we heard on the call was David Einhorn acknowledge that Proposal 2 does advance shareholder rights.”

A Federal District Court judge is weighing issuing a preliminary injunction on Apple’s shareholder vote on Feb. 27, as he prepares a ruling on whether Apple violated securities rules. The judge, Richard J. Sullivan, has indicated that Mr. Einhorn’s lawsuit appears likely to succeed as a matter of law.

David Einhorns Apple Inc. iPrefs Presentation by