SAN FRANCISCO (Reuters) - Hedge fund manager David Einhorn's Greenlight Capital has dropped its lawsuit against Apple Inc after winning a battle to stop the iPhone maker from a shareholder vote on a proposal to abolish its ability to issue preferred shares at its discretion.

The lawsuit's withdrawal, disclosed in a court ruling, closed the chapter on what was the strongest challenge by an Apple investor in years. Einhorn, leading calls on Wall Street for Apple to share more of its $137 billion in cash, wanted it to issue what he called "iPrefs," or preferred shares with a perpetual 4 percent dividend.

The hedge fund manager argued if the proposal had passed, it would have complicated future attempts to issue such securities. Greenlight won an injunction last week to halt a shareholder vote on the matter.

(Editing by Jeffrey Benkoe)