Gross, Daniel, Newsweek
Byline: Daniel Gross
An outraged hedge funder bites into Apple.
When Apple CEO Tim Cook took the stage at San Francisco's Palace Hotel to speak at an investment conference on February 11, the first questions weren't about the next iteration of the iPhone. Instead, analysts asked the CEO about a lawsuit that had just been filed by New York-based investor David Einhorn.
The 44-year-old proprietor of the hedge fund Greenlight Capital believes Apple "has a cash problem," as he told CNBC. It has too much of it. Einhorn has compared Apple to his "Grandma Roz," who lived through the Depression and was so focused on pinching pennies that she wouldn't leave him messages on his answering machine. Einhorn has sued Apple over a proposed governance change that would limit the company's ability to sell new preferred stock--the mechanism he has proposed Apple use to funnel some of its $137 billion cash pile back to shareholders.
Einhorn, who parlayed $500,000 in 1996 to an $8.8 billion fund today (cumulative return: 1,829 percent), has a history of tilting at very large windmills. A Midwesterner with a low-key mien--"very mild-mannered, but almost passive-aggressive," according to a financial-industry veteran--he possesses some very large scalps.
His modus operandi is to take deep dives into corporate balance sheets and make lengthy, sustained public cases about the merits (or faults) of stocks. For six years, he pursued a small financial company in which he held a short position, Allied Capital, compiling presentations on what he viewed as the company's suspect accounting methods. Then he wrote a 2008 book about it: Fooling Some of the People All of the Time. In October 2011 he used an hourlong, 110-slide presentation to argue that Green Mountain Coffee, the high-flying manufacturer of coffee pods, was overvalued.
Einhorn's fame--and a good chunk of his fortune, which Forbes pegs at $1.2 billion--stems in large measure from his 2007 decision to short Lehman Brothers. …