Apple Issues Statement About Returning Cash to Shareholders

[vvswarup]

Originally Posted by Evangelion

I know all that. My beef is with using the term "giving money BACK to the shareholders". The money in question did not come from the shareholders, but from people who bought their products. So call it what it is: giving money to the shareholders. "Giving the money back" means that they received money, and now they are giving that money back where they got it from. And that would mean giving it back to the people who bought their products since they are the ones who gave them money.

No, I'm not advocating that they do that. If they want to give that money to someone, it should go to the shareholders. But that is not "giving money back to shareholders", its just giving them money.

But the thing is, Apple received capital from shareholders when they went public. That is why it is termed as "giving money BACK to shareholders."

[spacepower7]

Originally Posted by ArtOfWarfare

Is that a literal bag of peanuts?

If so were they Planters? Dry roasted?

Totally off topic

Snarky me but I read that comment and got hungry for some Planters dry roaster peanuts.

Just out of random curiosity of Business and Marketing. IIRC the first few times that I had Planters Dry Roaster peanuts was on airplanes and I don't recall them being available in stores at the same time?

Anybody else old enough to remember.

Was there an "Evil" Planters peanuts marketing conspiracy?

[deific]

The whole thing sounds like a get rich quick scheme by Greenlight.
I'm a shareholder and have been for quite a while and I don't get a good feeling about this.
What happens after a dividend has been given.. the stock crashes again as people bail after a payout?

Sidenote: Recouping losses may work as an excuse for average traders like you and me, but day traders dump and add the stock multiple times a day, and there's no telling how little or much they've lost over the last several months. They love driving the stock down, then pumping it up and selling.. the waves are what they live for. My point is this sounds fishy.

[mabhatter]

Originally Posted by Evangelion

Is it really "giving money back to shareholders", since that money didn't come from the shareholders, but from the people who bought their products? When investor buys a share in a company, the money does not go to the company in question, but to the investor he bought the share from. Unless he took part in the IPO that is.

There was a time you bought shares in a company and that entitled you to a portion of the profits paid out every quarter. It was like an investment, and the profits were the interest.

At some point in the 70's-80's new companies started growing faster than their profits... So investors sold the stock to EACH OTHER for more than the quarterly interest was worth. At some point it became more of a "fashion statement" to have the stocks so bidding them up made everybody more money. Still
Take Apple's $600? Price and adjust for all the interest on those shares they DIDN'T PAY for 30 years.. That's why so much if the cash is counted as part of what the investors own.. If apple pays it out the next investor to own the stock owns a piece of a smaller pile of money.

Apple can't just "cash out" because of the taxes incurred on moving all those profits into US banks would take away a big piece. Investors would rather Apple sit on the money to fund R&D for the "chocolate factory" than pay TAXES on it. But now the pile is TOO big Apple cant possibly use that much even to reanimate/clone/portal Steve back and investors would like to buy things with their interest.

[smoledman]

The thing is for a company like Apple, there is very little marginal utility of the cash horde past $40 billion or so. They spend very little on R&D, approx $2.5 billion/year right now. So unless they're planning to do some major acquisitions(Viacom?), that money sitting there simply ensures their continued existence but does not guarantee creating brand new markets since their competitors - Google, Microsoft, Samsung have more then enough cash to compete.

[GoodWatch]

Apple could, and I say could, consider to lower the margin on their products a bit. From an average 27% to 15% or so. This will slow down the cash growth somewhat and will be of direct benefit to us customers: lower prices. Because when, this case Apple, a company admits is has too much cash and doesn't really know what to do with it, they charge too much for their products. They can because their customers don't ask questions, they just buy the goods.

[tekno]

Originally Posted by ogee

How about giving the staff, including retail, a bonus. We never get bonuses, and in my store all we were got for christmas was a small bag of peanuts!

Well, when you employ monkeys...

[Bonte]

Originally Posted by paul4339

Basically preferred shares get paid first at a specified dividend, before other shares, but they can't vote.

So for example you may see AAPL A shares, and AAPL B shares, with Apple maybe pays $10/share dividend and trades at $450. Apple B shares is 'guaranteed' to pay say $20/share and trades at a different price.

The result is A shares have volatile growth, and usually lower dividend; and B shares have set dividend and stable stock price.

Institutional investors, such as pensions (and people that want stable income) often like preferred because it adds a base, predictable ROI, and provides them with some potential growth.

Some people want the volatility because they want to cash in on the growth aspect of the company (non-preferred are better suited for this).

> what is it bad?

Because it 'guarantee' to the preferred shareholders is at cost of non-preferred shareholders and even at the cost of future opportunities. So if Apple, one day has flat earnings (for whatever reason) and needs money - they must still honor the preferred shares even if it means cancelling or altering strategic plans.


What Einhorn suggests makes sense, because he and others probably believes that Apple can sustain a consistent higher return, without need to borrow, for the long term. But more importantly his proposal is to vote against the blocking of preferred shares... he wants all options opened and considered (ie, don't rule it out)

On the otherhand, it could just be a ploy to get short term gains (because Einhorn has been incredibly successful by hedging).

.

tx, i also read up a bit on the matter. I see absolutely no value for Apple or its current stock holders in issuing preferred stock, Apple doesn't need the extra cash it would generate. Its more like a loan in perpetuity, good for growth company's that need cash but not as a vehicle to return money to shareholders.

Originally Posted by corrections

Also, it appears what Greenlight wants Apple to do is issue new preferred stock, and start paying high dividends on those new shares.

It phrases this as "giving back to shareholders," but it does nothing for current shareholders. It just creates a new class of financial paper designed to syphon cash from Apple's reserves exclusively to a group of new investors. And somehow, this reduction in Apple's cash reserves is supposed to be good for Apple's current shareholders because it will somehow lift the share price.

http://appleinsider.com/articles/13/...apital-lawsuit

[gnasher729]

Originally Posted by deific

The whole thing sounds like a get rich quick scheme by Greenlight.
I'm a shareholder and have been for quite a while and I don't get a good feeling about this.
What happens after a dividend has been given.. the stock crashes again as people bail after a payout?

If Apple paid let's say $10 per share to shareholders, Apple's cash is going to drop by $10 per share, so the value of Apple's shares is going down $10 at exactly the same moment. No need for anyone bailing; the value goes down as the money leaves the company.

Alternatively, Apple could spend say $10 billion to buy back shares. Again, the total value of the company drops by $10 billion, but at the same time, the number of shares drops, so the value per share would stay the same.

[M-O]

Originally Posted by ogee

How about giving the staff, including retail, a bonus. We never get bonuses, and in my store all we were got for christmas was a small bag of peanuts!

plus ~50% off merchandise, charitable donation matching, etc

[JHankwitz]

Originally Posted by gmanist1000

... they need to do something big. Build a freaking house run by Siri. They have $137 BILLION... do something crazy!

Money can't create innovation. It can only buy existing innovation, talent that provides limited amounts. Paying more will not create innovation out of thin air.

[Mr Fusion]

.. was this a last-ditch effort to keep the stock from sliding even further?

"Who want's cash?!?" "Oooo oooo ME ME ME!!!!"

[Dave00]

Here's another comparison that might give one pause.

If AAPL's cash and investments were a mutual fund, it would be the 3rd largest in the United States, behind Vanguard Total Stock Market Index and ahead of American Growth Fund of America. Thus, they have more money to try to figure out how to invest than all but two of the mutual funds in the United States.

[unplugme71]

Step 2 of Apple's failure plan.

1. Maps
2. Get rid of cash
3. Continue to make the same products with spec bumps
4. Market saturated. No 'new' products.
5. Apple goes broke, gets bought out by some ****** chinese company or closes its doors.

[Bubba Satori]

MS faced a similar situation 15 years ago.
I hope Apple thinks different and does something different.
Radically different.


I think Apple should split itself up.

----------

Originally Posted by AbyssImpact

Don't look now, but Apple will be back at $700 real soon.

I remember hearing that at 650, 600, 550, 500, 450...

"Mortgage everything and buy all you can."

[Badandy]

Originally Posted by CIA

Apple didn't give a dividend for years, decades.... The last 10 years has shown great growth, and they still didn't give one out. Now suddenly they trickle out some money, and all these broke relatives show up demanding more. If you don't like your investment in AAPL, move your money elsewhere. I look at AAPL long, and if the tech world has shown us anything, is long in the tech world means lots and lots of HUGE shifts in the computing world. So yea, I'd like Apple to have the money in the bank, so they stick around long regardless of the economy. I enjoy the products. Not my fault you bought at $690. If it makes you feel better I sold at $360. Still made money, so I'm happy tho.

You don't get it. The money Apple has is/was doing nothing. Above the cash they've used, their cash position has been entirely unrelated to their growth. If they can find a good use to over $100b in cash, go ahead. But they've demonstrated they can't, and companies with large cash positions are often thought to act a bit more reckless in acquisitions.

And LOL at broke relatives. The shareholders own the company. People keep saying it but so many people don't get it.

----------

Originally Posted by unplugme71

Step 2 of Apple's failure plan.

1. Maps
2. Get rid of cash
3. Continue to make the same products with spec bumps
4. Market saturated. No 'new' products.
5. Apple goes broke, gets bought out by some ****** chinese company or closes its doors.

How will getting rid of cash IT'S NOT USING contribute it any way to Apple "going broke"?

[Nightarchaon]

way to manipulate a falling stock into a quick burst of growth again so you can get out now with as much as possible before it continues its long decline.

I dont see apples stock doing anything other than heading down now that the iPhone an iPad are "also rans" in a market they are no longer innovating in, and i don't see the apple TVset, having the impact shock on the Television market that the iPhone and iPad had on their respective markets to boost apples stocks back to these levels again.

Unless apple unveil something as disruptive and innovate as the iPhone or iPad up its sleeve in the next year or so, that stock is not worth holding on to.

[mccldwll]

Originally Posted by Bonte

tx, i also read up a bit on the matter. I see absolutely no value for Apple or its current stock holders in issuing preferred stock, Apple doesn't need the extra cash it would generate. Its more like a loan in perpetuity, good for growth company's that need cash but not as a vehicle to return money to shareholders.



http://appleinsider.com/articles/13/...apital-lawsuit

It wouldn't generate any extra cash for aapl, just for shareholders. As I understand it, the rough proposal boils down to something like one share of preferred for every ten shares of common ($50B preferred yielding 4%=$2B/yr div). From a dividend standpoint, it's roughly a 20% increase in payout over present div (no big deal). The advantage to shareholders over a div bump is that could sell the preferred and pull @10% of their aapl investment out, (with taxes due to extent sale price exceeds allocated basis) but without impacting their longer term ownership interest in aapl's future growth. It sounds interesting so you have to wonder what the downside really is. I'm agnostic at the moment.

[mccldwll]

Originally Posted by Nightarchaon

way to manipulate a falling stock into a quick burst of growth again so you can get out now with as much as possible before it continues its long decline.

I dont see apples stock doing anything other than heading down now that the iPhone an iPad are "also rans" in a market they are no longer innovating in, and i don't see the apple TVset, having the impact shock on the Television market that the iPhone and iPad had on their respective markets to boost apples stocks back to these levels again.

Unless apple unveil something as disruptive and innovate as the iPhone or iPad up its sleeve in the next year or so, that stock is not worth holding on to.

Sounds like you should buy Blackberry Limited (there's an appropriate name, though probably better than Research No Longer In Motion), msft (demand for the Surface is "off the charts", no really, still not on the charts), NOK (coming back any day, week, month, or year now, I'm sure), SSNLF (if you trust the Korean exchange and securities laws to accurately state sales, E&P, etc.), HTC, or GOOG (if you don't think people mind getting Scroogled). Better yet, still time to get in on Facebook for your 2013 tax loss.

[IJ Reilly]

Originally Posted by gnasher729

If Apple paid let's say $10 per share to shareholders, Apple's cash is going to drop by $10 per share, so the value of Apple's shares is going down $10 at exactly the same moment. No need for anyone bailing; the value goes down as the money leaves the company.

Alternatively, Apple could spend say $10 billion to buy back shares. Again, the total value of the company drops by $10 billion, but at the same time, the number of shares drops, so the value per share would stay the same.

Absolutely not. Cash is not factored into a stock price, no way, no how. Not. Liquid assets, in fact all company assets, are a complete abstraction to stockholders, since the stockholders have zero access to any of this unless the board pays some of it out in the form of a dividend. Conversely, when a board declares a dividend, this increases shareholder value in a tangible, measurable way. So, like many others, you have it figured exactly backwards.

[apple-win]

Originally Posted by IJ Reilly

Absolutely not. Cash is not factored into a stock price, no way, no how. Not. Liquid assets, in fact all company assets, are a complete abstraction to stockholders, since the stockholders have zero access to any of this unless the board pays some of it out in the form of a dividend. Conversely, when a board declares a dividend, this increases shareholder value in a tangible, measurable way. So, like many others, you have it figured exactly backwards.

Many shareholders choose Pozi scheme over receiving dividends.

[IJ Reilly]

Originally Posted by vvswarup

But the thing is, Apple received capital from shareholders when they went public. That is why it is termed as "giving money BACK to shareholders."

That's it, more or less. The markets created the capital Apple used to built its business in the first place; the subsequent trading of those equity share made the capital market possible. In addition, Apple did not stop issuing shares with the initial IPO -- the company continues to issue stock grants and options to employees for compensation and retention. So this is another function of the equity markets.

[FluJunkie]

Originally Posted by IJ Reilly

Absolutely not. Cash is not factored into a stock price, no way, no how. Not. Liquid assets, in fact all company assets, are a complete abstraction to stockholders, since the stockholders have zero access to any of this unless the board pays some of it out in the form of a dividend. Conversely, when a board declares a dividend, this increases shareholder value in a tangible, measurable way. So, like many others, you have it figured exactly backwards.

While I am fairly pro-dividend, I believe what the poster was saying is correct. The exchanges, by tradition, adjust the price of a stock downward by the per-share dividend amount when it goes ex-dividend. The market may be rather poor at pricing cash and assets, but it's quite good at pricing dividends in.

[IJ Reilly]

Originally Posted by FluJunkie

While I am fairly pro-dividend, I believe what the poster was saying is correct. The exchanges, by tradition, adjust the price of a stock downward by the per-share dividend amount when it goes ex-dividend. The market may be rather poor at pricing cash and assets, but it's quite good at pricing dividends in.

But they don't do that by tradition or any other mechanism. The ex-dividend behavior of stocks is proof of what I am saying. Dividend-bearing stocks trade at a premium before the ex-dividend date and at a discount during the ex-dividend period. This is the markets pricing in the value of the dividend.

The primary measurement of stock valuation, PE, does not include cash or other assets. It doesn't factor in debt, either. Occasionally you will see someone doing a back-of-the-envelope ex-cash valuation for PE, but this number is really only meaningful if you're talking about a theoretical takeover price for the company. A takeover company will inherit the target's cash and/or debt, so the cash becomes a discount and the debt is added onto the takeover price. Ordinary stockholders aren't a party to assets or debt except to the extent that they influence earnings.

[FluJunkie]

Originally Posted by IJ Reilly

But they don't do that by tradition or any other mechanism.

Yes, they do. "On the ex-dividend date, the stock price is adjusted downward by the amount of the dividend by the exchange on which the stock trades.

Read more: http://www.investopedia.com/articles/stocks/07/dividend_implications.asp#ixzz2KKTwAPEY"

You can find citations for this everywhere. It might be lost in the daily up and down movement of the stock price - and for something like Apple almost certainly is - but the adjustment is there.