Apple likely to have broken SEC rules with 'bundled' proxy proposals, judge says

In a hearing on Tuesday, U.S. District Judge Richard Sullivan sided with counsel representing David Einhorn's Greenlight Capital on the so-called "bundling" argument, which alleges Apple broke SEC rules by placing multiple issues up for shareholder vote into one proposal, reports Fortune.

"Candidly I do think the likelihood of success is in favor for Greenlight on the merits," Judge Sullivan said.

However, the jurist failed to reach a decision as to whether the hedge fund would be irreparably harmed by Apple's proxy proposal, a requirement for an injunction against a shareholders vote scheduled for Feb. 27. He added that even if an injunction was issued, Apple still has the power to not grant the preferred stock Einhorn is fighting for.

According to the publication, Judge Sullivan appeared to lean toward a "wait-and-see" scenario set forth by Apple.

"It's a mess no matter what I do," he said.

Greenlight's lawsuit argues that Apple's "bundling" of three items into one proposal in its proxy statement goes against SEC rules. In particular, Einhorn takes issue with Apple's so-called "Prop 2" proxy proposal which, If passed, would remove the power to issue preferred stock from Apple's board and put it in the hands of shareholders.

The hedge fund is seeking the issuance of perpetual preferred stocks, dubbed "Greenlight Opportunistic Use of Preferreds" or "GO-UPs," that would pay out higher than normal dividends and mete out some of Apple's $137 billion cash hoard.

In response to the allegations, Apple claimed last week that the GO-UPs would only enhance Greenlight's financials and "do not serve the public interest."

Judge Sullivan said a ruling would be reached before the scheduled shareholders meeting next Wednesday.