Da Big Story

Yesterday’s AAPL:

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AAPL Large and Small Effective Volume

Apparently, hanging over Apple, Inc. is the billions and billions of share holder equity dollars that might be siphoned off through the sale of preferred shares:

Shares of Apple (AAPL) rallied over 2% in the final 30 minutes of trading Thursday because the company finally showed some signs that it does, in fact, care what shareholders think. The subject of the statement was Greenlight Capital’s David Einhorn’s suit filed against the company urging shareholders to reject the upcoming “Proposal 2.” The proposal effectively removes the ability of Apple to issue preferred stock (although Apple said preferreds could still be issued with shareholder approval). Einhorn believes that issuing preferred stock would be one way for Apple to unlock the value that is held on its balance sheet. Einhorn is right that something needs to be done, as Apple is making close to nothing on its ~$130 billion cash hoard. Einhorn asserts that for every $50 billion in perpetual preferred shares Apple issues, $32 per share of value will be unlocked.

Should one believe the news? Only if confirmed in price/volume action. At the close yesterday and apparently on this news, AAPL shot up.  I adjusted my position to the upside which made me comfortably hum.

It is always difficult for me to short this company. It has so much money, experience, and brainy people. Even an AAPL hedge fund could probably take over the universe; if not that, at least return a few percentage points in yearly dividend pay outs. But this is the extent of my knowledge of companies.

Pascal Willain published this chart behind his site’s wall:

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This chart suggests that the 430 holder’s club is sufficiently stuffed with stock that bears won’t have any easy time shoving the price to 400; meanwhile it also suggests that 500/share is downhill from here.

I saw only the first of these charts at the close and added another long, but small (these things add up), position. I thought: if it is a short covering rally only, it sure shows the strengths of bullish holders. And my take is more or less confirmed by Pascal’s second chart. We’ll see.

Further adjustments will be necessary.

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