Good morning

The headlines:

  1. Apple’s Cash Pile.

    Link: and the activist shareholder.

    David Einhorn, of Greenlight Capital, is opposing Apple’s plan to eliminate its preferred stock. And by “preferred stock”, what he means is “Apple’s option to issue preferred stock without shareholder approval”. And by “eliminate it”, Apple means “remove the option for us to ever issue them without shareholder approval”. But that doesn’t mean that Apple will never issue preferred stock – just that they will have to get shareholder approval to do it in the future.

    So I don’t really understand what his complaint is – because it sounds sensible to me. The preferred stock (shares) can have voting rights. And I definitely think that the current shareholders should have a say in whether they want the board to give some say to someone else in the future.

    The real point of all this is: Apple ended 2012 sitting on $137 billion in cash (68% higher than 2011). Which compares to a market capitalisation today of $440 billion.

    And Mr Greenlight thinks that the board should issue preferred stock to current shareholders in order to return some of that cash to them. Which does make some sense – because if over 25% of your Apple investment is just plain cash, then that cash isn’t generating anything for the company (except, maybe, some interest). So a shareholder could be better off taking that cash and investing it elsewhere, whilst continuing to earn returns on the Apple assets that are actually being used to generate income.

  2. Zimbabwean indigenisation.

    Link: there are foreign investors doing it.

    Cement group PPC announced that it is constructing a $200 million cement plant in Zimbabwe. Which is good news for the Zimbabwean economy, but also goes to show that foreign investment is not always deterred by the “protectionist” measures so hated by the free market economist.

    PPC complied with Zimbabwe’s indigenisation laws in 2012, which include a 51% indigenous Zimbabwean ownership requirement.

    I found this news interesting for a few reasons (only one of which is the fact that I’m Zimbabwean). The real reason it’s interesting is its defiance of conventional economic wisdom. I’ve been reading Ha-Joon Chang’s “23 Things They Don’t Tell You About Capitalism” – and he makes the very clear point that the liberalisation of a country’s business restrictions is not always correlated with economic growth.

    Particularly if you look at China, South Korea and the other South-East Asian countries – which demonstrated, and continue to demonstrate, high levels of economic growth coupled with not so much ease in doing business.

    Just something to think about.

That’s all for now.

Have a good day.