Publications
Publications
  • November 2019
  • Case
  • HBS Case Collection

Apple, Einhorn, and iPrefs (Abridged)

By: Carliss Y. Baldwin and W. Carl Kester
  • Format:Print
  • | Language:English
  • | Pages:6
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Abstract

In March 2013, Apple Computer has a very large cash balance, and is under pressure to return cash to shareholders. Hedge fund manager David Einhorn thinks Apple can "unlock value" by issuing perpetual preferred stock, dubbed iPrefs. Henry Blodget, CEO of Business Insider, disagrees, saying "you can't just wave your magic wand and make something of nothing." This short case is designed to support a discussion of "perfect" markets and the Modigliani-Miller capital structure irrelevance propositions. The case focuses on two questions: (1) From a shareholder's perspective, how is Apple's cash different from cash in a bank or money market account? (2) Can Apple create significant value for shareholders by splitting each common share into an iPref plus a common share?

Keywords

Markets; Stock Shares; Value Creation; Business and Shareholder Relations

Citation

Baldwin, Carliss Y., and W. Carl Kester. "Apple, Einhorn, and iPrefs (Abridged)." Harvard Business School Case 220-043, November 2019.

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