Curious Capitalist

TIME Exclusive: Icahn Files Apple Shareholder Proposal

The richest man on Wall Street is opening a new front in his quest to persuade Apple to part with more of its massive cash stockpile.

  • Share
  • Read Later
Photograph by Platon for TIME

Subscribe to TIME here.

Veteran investor Carl Icahn is opening a new front in his quest to persuade Apple to part with more of its massive cash stockpile.

Icahn believes the technology giant should share more of its wealth with stockholders. So to push Apple, he now wants stockholders to vote on whether the company should spend more of its billions to buy back its own shares on the public market. A buyback would almost certainly drive up the price of Apple’s stock—and increase the value of Icahn’s holdings along with those of all Apple investors.

Icahn tells TIME he filed a shareholder proposal with Apple on Nov. 26, three days before the deadline for measures to be voted on at the company’s next annual shareholders meeting. His measure calls for a share buyback and is in the form of a precatory proposal, which means that even if a majority of Apple shareholders approved, it would not be binding on the company’s management. That’s the typical approach for shareholder resolutions, even those coming from investors who are at odds with management.

For his part, Icahn says he doesn’t consider his proposal an indictment of Apple CEO Tim Cook, or the company’s management, per se. “Tim Cook is doing a good job with the business,” Icahn tells TIME. “I think he’s good whether he does what I want or not.” But, says Icahn, referring to the company’s huge cash stockpile, “Apple is not a bank.”

TIME Magazine Cover, December 16, 2013

Photograph by Platon for TIME

Icahn has the option of withdrawing his proposal if he and Apple can come to terms. If not, the situation could turn into a proxy fight against Apple, even if it is not a particularly hostile or aggressive one. The two sides would vie to persuade stockholders to vote their way. (The term proxy fight refers to the fact that shares from stockholders who cannot attend the annual meeting in person can be voted by proxy. In practice, waging a proxy fight means persuading big institutional investors to support a measure.)

Apple confirms that Icahn has filed a precatory proposal and, in response to TIME’s query about it, Apple spokesman Steve Dowling said: “Earlier this year we more than doubled our capital return program to $100 billion, including the largest share repurchase authorization in history. As part of our regular review process, we are once again actively seeking our shareholders’ input on our program, and as we said in October, the management team and our board are engaged in an ongoing discussion about it which is thoughtful and deliberate. We will announce any changes to our current program in the first part of calendar 2014.”

Icahn’s proposal marks a new stage in the clash between one of the world’s most valuable and successful companies and its most formidable shareholder activist. (Icahn, worth $20.3 billion, just edges out George Soros as the top Wall Streeter on Forbes’s list of the richest people in America.) It’s a battle to which TIME has had a front row seat over the last several weeks. In a series of exclusive interviews for a TIME cover story about Icahn and shareholder activism, I have followed Icahn’s efforts to get Apple to part with more of its $147 billion cash hoard. As he told me over dinner and a five-hour interview at his apartment on Oct. 29th–the same dining table where he’d sat with Cook in late September and first proposed a buyback plan– the precatory statement to Apple isn’t about trying to restructure a weak firm. “I’m not against the management of this company. But they’ve got too much money on their balance sheet.”

Apple has already done a $17 billion bond offering (the company decided to borrow the money rather than pay the hefty U.S. taxes required to bring some offshore cash back home) in order to raise funds for a planned $60 billion share repurchase over three years. But Icahn says that’s not enough. In a letter to the company dated Oct. 23rd and posted on his new corporate activism website, shareholderssquaretable.com, Icahn noted that the company trades at a discount to the S&P 500 index despite the fact that it’s a cash cow—Apple will generate around $51 billion worth of free cash next year.

Shareholders, say Icahn, deserve a bigger share. And Cook, he says, has been willing to consider his views. Icahn told TIME: “We’ve discussed a lot of things, and he asked a lot of questions, and really listened.” Icahn says his most recent conversation with Cook was a 20-minute phone call Nov. 21—which Cook’s assistant initially tried to schedule at 5 a.m. Pacific Time. “That’s usually when I go to bed! This guy’s tougher to get than the President,” laughs Icahn.

“A lot of people say Steve Jobs probably wouldn’t have talked to me, and maybe that’s true,” Icahn tells TIME. “But I think he [Cook] found our conversation sort of interesting. He said, `Look, you’ve accomplished a lot, and we want to listen to you.’”

TIME subscribers can read the full cover story Thursday, December 5 at 7AM EST.

13 comments
TrouserPress
TrouserPress

An "activist investor" is just a soft name for "corporate raider".

I think a better path for Apple is proffered at Slate.com.

danmdan3842
danmdan3842

Steve Jobs would have told him to go away - or words to that effect !

baerjamin1
baerjamin1

Unlike many of the businesses in Technology Apple has had some very lean years.  As a very long term shareholder in Apple I think it's a disgrace that someone who sees an opportunity to shake loose a few billion dollars for their own advantage attacks a company that just 15 years ago was on the verge of going out of business all together.  Where were you then Mr. Icahn?  Where have you been over the last ten years of growth and prosperity?  This jerk is trying to get Apple to divest itself of the only thing that stands between todays success and tomorrow's ignominy.  Tell Icahn to jump off a short pier...

DavidWilliams3
DavidWilliams3

How ironic is it that time is calling Icahn the most important guy on Wall Street. Exactly what value is he bringing to the table here? Apple already had $150b in the bank prior to Icahn, isn't his m.o. showing up unwanted and shaking down a company aka greenmail? How is Icahn or his ilk actually INVESTING in building companies rather than just skimming off Apple's work? Is that all investment is about these days, along with creating "financial instruments" which resulted in the $700 billion in losses from undisciplined greed that taxpayers had to cover. Why is Time fawning over him, other than his billions?Perhaps Carl can go harass Samsung or Google or Amazon for a change.

modturnip
modturnip

Apple shouldn't buy back anymore stock; they've bought enough...icahn only wants this buyback to guarantee a better return on his recent large bet.  Apple should use this money to buy strategic companies / acqui-hire  to build the next big thing.

For example: buy netflix and disney (owns espn) and plug that content into apple tv.  Open the apple tv up to app developers and watch cable disappear in 5 years.   

rwbwinski
rwbwinski

Go away carpetbagger. We want NOTHING you've got - NOTHING.

Patfactorx
Patfactorx

Apple is owned by the shareholders. They need to understand that the cash on the balance sheets is not just play and bonus money for the executives. We need to see some more shareholder value. All the executives are making their huge bonuses at the expense of the shareholders. 

Br.Bill
Br.Bill

Apple's large cash holdings are a large reason why its stock value is high. Carl wants to cut open the goose that lays the golden eggs.

RushJoMo
RushJoMo

Sometimes man you jsut have to roll with it.


www.true-anon.tk

SmoothEdward1
SmoothEdward1

He should use some of his billions to go to Rio and have a smile put on his face. He is creepy.