Yet, Apple's charter includes a provision that authorizes the company's board of directors to issue preferred stock at will--something called a blank check, because the board can act without having to first seek the approval of existing shareholders. And, according to the board, this provision--a remnant of a time when the company might have needed quick access to more funds or to protect itself from a hostile takeover--is against the interest of current shareholders.
Thus, the board is asking shareholders to strike the blank-check provision from the company's charter during its upcoming annual meeting. Crucially, the same proposal also asks shareholders to modify the charter in two more ways; the first affects the way the board's directors are elected, and the second assigns a nominal value to each share--a move that could provide the company with a number of tax and legal advantages in several jurisdictions.
Greenlight's management is obviously unhappy with the pace at which Apple has been doling out dividends, and wants the company to accelerate the payout rate by issuing perpetual preferred stock. This kind of stock would be issued gratis to existing shareholders; it would come with a fixed dividend, which the fund pegs at 4%; and it would not carry a specific redemption date on which the company could force its holders to sell their shares back to it.
Because the new preferred stock would be tradeable just like any other stock, Greenlight's reasoning is that it would very quickly take on significant value at a relatively low cost to existing shareholders. After all, a preferred stock that carries a fixed dividend backed by a company of Apple's size and prestige is as close to a sure thing as you can get these days, and it's likely that its price would very quickly outpace the amount of money that the company would have to pay out in order to meet its dividend obligations, unlocking--in Greenlight's words--a significant amount of value for those who already own Apple's stock.
As things stand now, Apple's board could enact Greenlight's plan without having to seek the approval of all shareholders; if, however, the charter is modified at the upcoming annual meeting, it would be much harder (and probably more expensive) for the company to issue preferred shares, because it would have to take a vote of all common stockowners before doing so.
The bundling conundrum
And this brings us to the lawsuit at hand, which, ironically, has nothing to do with preferred shares--at least not directly.