This is really a brilliant idea David Einhorn has and if Apple doesn’t do it, I wouldn’t be at all surprised to see some other companies with lots of cash flow give it a shot. If it works for one, then you could see a floodgate open up. This could actually power up the next leg in a bull market. But then again if companies like Apple, Microsoft, Cisco and others that have enormous reliable cash flow can issue preferred stock that trades at much higher multiples, why doesn’t the underlying common dividend paying stocks themselves have a higher multiple. The more you think about it, this starts to look like a circular logic flaw in an excel spreadsheet formula.
Can a new breed of irrationally exuberant investor light a fire under Apple’s AAPL +2.97% shares? David Einhorn thinks so. That is why he is picking a fight with the company.
Since May 2012, the hedge-fund investor, whose firm Greenlight Capital holds a stake in Apple valued at about $610 million, has been trying to sell the company on a novel idea. Namely, to issue a new class of high-yielding preferred stock to existing investors.