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Old Oct 24, 2013, 08:44 AM   #1
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Carl Icahn Increases Apple Stake to $2.5 Billion, Requests Immediate $150 Billion Stock Buyback




Billionaire activist investor Carl Icahn has published a new letter sent to Apple CEO Tim Cook, addressing his thoughts on an enhanced stock buyback plan for the company. The letter, released on Icahn's new Shareholders' Square Table website and republished by StreetInsider, also notes that Icahn now holds $2.5 billion in Apple stock, having increased his position by over 20% since he met with Cook at the very end of last month.

As he noted in his tweet following the meeting with Cook, Icahn is requesting that Apple undertake an "immediate" $150 billion buyback of its stock, arguing that it would be a terrific use of cash and debt given his belief that Apple's stock is currently severely undervalued. Such a program would mark a major expansion of the current program designed to repurchase $60 billion worth of stock over three years.
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When we met, you agreed with us that the shares are undervalued. In our view, irrational undervaluation as dramatic as this is often a short term anomaly. The timing for a larger buyback is still ripe, but the opportunity will not last forever. While the board's actions to date ($60 billion share repurchase over three years) may seem like a large buyback, it is simply not large enough given that Apple currently holds $147 billion of cash on its balance sheet, and that it will generate $51 billion of EBIT next year (Wall Street consensus forecast).
Icahn lays out his expectations for earnings per share and stock value growth that could be expected from such a move, and notes that Apple could easily manage debt payments if it were to finance the entire $150 billion buyback with debt at 3% interest.
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While this would certainly be unprecedented because of its size, it is actually appropriate and manageable relative to the size and financial strength of your company. Apple generates more than enough cash flow to service this amount of debt and has $147 billion of cash in the bank. As we proposed at our dinner, if the company decided to borrow the full $150 billion at a 3% interest rate to commence a tender at $525 per share, the result would be an immediate 33% boost to earnings per share, translating into a 33% increase in the value of the shares, which significantly assumes no multiple expansion. Longer term (in three years) if you execute this buyback as proposed, we expect the share price to appreciate to $1,250, assuming the market rewards EBIT growth of 7.5% per year with a more normal market multiple of 11x EBIT.
Finally, Icahn notes that he would not participate in the buyback he proposes, indicating that there "nothing short term about [his] intentions" as he attempts to convince Apple and his investors that he is not simply pushing an agenda serving his own immediate interests without regard for the company's long-term health.

Article Link: Carl Icahn Increases Apple Stake to $2.5 Billion, Requests Immediate $150 Billion Stock Buyback
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Old Oct 24, 2013, 08:46 AM   #2
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Go away!
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Old Oct 24, 2013, 08:48 AM   #3
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Who does he thinks he is?
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Old Oct 24, 2013, 08:49 AM   #4
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Oh good, another investment banker who thinks he knows what he's doing! great!
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Old Oct 24, 2013, 08:50 AM   #5
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Stock Manipulation?

This makes Gordon Gecko look like a back seat investor.
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Last edited by OceanView; Oct 24, 2013 at 12:55 PM.
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Old Oct 24, 2013, 08:50 AM   #6
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Don't trust him Tim!
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Old Oct 24, 2013, 08:51 AM   #7
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Icahn't stand this guy.

Shenanigans.

Last edited by Return Zero; Oct 24, 2013 at 03:32 PM. Reason: Phil Schiller
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Old Oct 24, 2013, 08:52 AM   #8
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I hope Tim and Peter were laughing as they read this letter.
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Old Oct 24, 2013, 08:52 AM   #9
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Ignore it Tim!
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Old Oct 24, 2013, 08:53 AM   #10
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Earlier this week he sold half his stake in Netflix and drove the price down from $390 a share to $320 a share in a morning.
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Old Oct 24, 2013, 08:53 AM   #11
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who does he think he is? abominable! do what you want, tim.
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Old Oct 24, 2013, 08:53 AM   #12
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Sorry but Apple has a Market Cap of $500B, they won't say it, but they don't really care what someone with $2.5B of shares has to say about how to run the company.

I would ignore him, just look what Activist Investors did for JCPenny...
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Old Oct 24, 2013, 08:54 AM   #13
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Tim Cook: Certainly, you spent 2.5 Billion 5 minutes ago, let us reward that with a 150 billion dollar payout... NOT

What a douche. If Cook caters to this fool he should really be replaced. I do not care if the 5c or other products are duds. Not every product can be a smash hit. But jeopardizing the company because of a bullying investor is something no CEO should ever do. So, man up Cook and showIcahn the door.
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Old Oct 24, 2013, 08:55 AM   #14
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Quote:
Originally Posted by Rogifan View Post
I hope Tim and Peter were laughing as they read this letter.
Thumb resize.

This Carl guy will be the end of Apple if he has his ways.
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Old Oct 24, 2013, 08:55 AM   #15
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It should be called illegal what he is doing. Playing a public charade with a company to use all its cash reserves to buyback stocks, that he owns and knows would make him a fast buck.

Apple did just fine before these banksters came crawling out of their nests.
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Old Oct 24, 2013, 08:55 AM   #16
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I'm pretty sure that Apple has other things it wants to do with (at least some of) that $147 billion.
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Old Oct 24, 2013, 08:56 AM   #17
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Didn't he sell his Netflix the other day? He must have put that money to Apple.
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Old Oct 24, 2013, 08:56 AM   #18
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If you have 2.5 Billion dollars and you want more, instantly, does that make you a douchebag?
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Old Oct 24, 2013, 08:56 AM   #19
Naaaaak
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"Spend *all* of your money on shares so I can get rich quick."

That Tim Cook even entertains this guy with a meeting is a waste of time.

What do you think happens when it doesn't happen? He sells and converts those long positions to shorts? He tries to rally a bunch of other shareholders to his cause? It will be fun watching this blowhard get trolled.
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Old Oct 24, 2013, 08:57 AM   #20
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Money does certainly not protect you from being a douchebag.
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Old Oct 24, 2013, 08:58 AM   #21
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Like any speculator, he wants a good return on his investment. His method seems to be to load up and then use his clout to publicly drive the price up. What do people think will happen when he sees the price hit anywhere near the dizzy heights it did last year? It's like a time bomb, waiting to blow.

Whilst he is roaming around any stock, I wouldn't go near it with bargepole.
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Old Oct 24, 2013, 08:58 AM   #22
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Quote:
Originally Posted by Naaaaak View Post
"Spend *all* of your money on shares so I can get rich quick."
Yea, this is all Carl wants. Bump the share price up as quick as possible and take his profits. This whole charade in no way benefits Apple, their employees, or their customers.
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Old Oct 24, 2013, 08:58 AM   #23
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True Story:

"Rich old man has nothing else better to do than posing with CEO celebs and asking for costly 150 billion dollar tips."
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Old Oct 24, 2013, 08:59 AM   #24
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Who does this son of a bitch think he is? Request? Go to hell! Go **** this son of a bitch.
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Old Oct 24, 2013, 08:59 AM   #25
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Quote:
Originally Posted by NewbieCanada View Post
Earlier this week he sold half his stake in Netflix and drove the price down from $390 a share to $320 a share in a morning.
In doing so he created a deal for long-term Netflix investors to buy more shares at a lower price. Any disruption he creates will be temporary.
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