Apple Talking With Investors About $15-16 Billion Bond Offering

Discussion in 'Politics, Religion, Social Issues' started by MacRumors, Apr 30, 2013.

  1. macrumors bot

    MacRumors

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    Following up on yesterday's initial filing from Apple addressing the company's efforts to issue a bond offering to raise cash in support of its stock buyback program, the company today filed a prospectus with the Securities and Exchange Commission outlining its general plans, which include six different chunks of debt with staggered maturities. The Wall Street Journal has more on Apple's prospectus and other details being revealed in one-on-one meetings with potential investors:
    The Wall Street Journal indicates that Apple has not yet announced exactly how much money it intends to raise with today's offering, but that Apple is expected to offer "more than $10 billion" worth of bonds. Reuters cites a higher figure of $15-16 billion, which would rank the deal as one of the largest investment-grade bond offerings in history.

    While Apple holds approximately $145 billion in cash and investments, roughly two-thirds of that money is currently held in foreign countries and would be subject to significant taxes if it were to be returned to the United States. As a result, Apple has elected to keep that money offshore and instead rely on relatively cheap debt to fund its capital return program, which consists primarily of a major stock buyback program and a quarterly dividend. Apple's current plan involves spending $100 billion to return capital to investors by the end of 2015.

    Update: Reuters reports that the order book for Apple's bond offerings has now topped $40 billion, meaning that investors have offered bids for more than twice the amount of debt Apple is expected to issue. The oversubscription gives Apple flexibility in finalizing interest rates and amounts to be raised and indicates very strong interest in Apple's offerings.

    Update 2: Bloomberg reports that Apple will sell a total of $17 billion worth of bonds.
    Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

    Article Link: Apple Talking With Investors About $15-16 Billion Bond Offering
     
  2. macrumors 68000

    keysofanxiety

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    #2
    I don't know why, but the idea of Apple borrowing money to do this just doesn't sit right with me. That was one of the things Jobs was most proud of- no debts for the company. And let's face it, the stock buyback program is predominantly to artificially increase the stock value of AAPL -- unless there's something I'm missing (I don't profess to understand how this works, so forgive me if this comment is a bit naive!)
     
  3. macrumors 603

    Rocketman

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    #3
    The buzz is the 10 year notes will price under 2.4% rate.
     
  4. macrumors regular

    Joined:
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    #4
    Leverage is like cocaine - makes the good times better and makes the bad times worse.
     
  5. zin
    macrumors 6502

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    #5
    How much would Apple's foreign reserves be subject to in the form of domestic taxes? Does anyone know an effective percentage?
     
  6. macrumors 65816

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    #6
    The beginning of the end.
     
  7. macrumors 65816

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    #7
    If a 30% fee is such a great deal for app developers, why is it such a bad deal for AAPL when they want their cash??? :p
     
  8. macrumors 68030

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    #8
    Bond... shaken not stirred.
     
  9. macrumors regular

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    #9
    What they're "banking" on (get it?) is the price of the stock to go up creating pretty much free money without doing anything. If the stock price drops after the stock repurchases, however, the leverage will cost them even more. This is showing how confident Apple is with AAPL.
     
  10. macrumors 68020

    Squilly

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    #10
    2043 is scary to think about.
    What is it with Apple and making history?
     
  11. macrumors newbie

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    Jan 22, 2013
    #11
    Anyone saying that this is the beginning of the end, or that Jobs wouldn't have wanted it, should take a finance class.
     
  12. macrumors member

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    #12
    30 years is a pretty long time for a tech company, isn’t it? A lot will happen between now and 2043…
     
  13. macrumors 68020

    Squilly

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    #13
    I wouldn't go that far, but they'd be better off with not having that much debt. Should pay it all off at once. Or within a smaller period.
     
  14. macrumors G4

    Small White Car

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    #14
    This is your mistake. There's nothing "artificial" about the idea that restricting something increases its value.

    That's a basic economic fact, not an illusion.
     
  15. macrumors 68000

    keysofanxiety

    Joined:
    Nov 23, 2011
    #15
    Ah, right. That makes a little more sense.

    Again, at the risk of annoying you with an obvious question: why does Apple even need to do this in the first place? Wouldn't it be better to simply stay out of debt, push money into innovation and continue to bring out great products? The stock goes up and down; but Apple's declining stock isn't really in tandem with their profits or anything like that.

    TL;DR: Why is it worth the risk? If Apple continue to be profitable as they have, won't the stock go back up again?
     
  16. macrumors 603

    Rocketman

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    #16
    In the ballpark of 39%.
     
  17. JAT
    macrumors 603

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    #17
    35% minus any foreign income tax already paid, most likely a direct credit rather than any sort of deduction. There could be other reductions, as well, I am not a tax expert, nor do I know Apple's specifics.

    Could also be State tax.
     
  18. macrumors 65816

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    #18
    Everything that has a beginning has an end.
     
  19. macrumors 6502

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    #19
    I wonder if these bonds can be used as a mechanism to effectively repatriate the funds without taxation. Fr example, if they are purchased by Apple's foreign entities or otherwise swapped Apple may get to us the funds in the US without paying the taxes until an amnesty or tax change occurs.
     
  20. macrumors 6502a

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    May 8, 2008
    #20
    Because it includes the cost of building out facilities, handling the sales, and service as well as marketing the store. Their fee is far less than it would cost for developers to obtain the same exposure. On the other hand it is up to the developer to set pricing and factor in all cost involved. They are even supplying many of the tools for development and testing as well. They can always do a web app like Apple provided in the beginning and sell on their own site and pay nothing to apple. Do their own promotion and support. If they were developing for xbox they would pay a lot more, if they could get on the platform to begin with.
     
  21. macrumors G4

    Small White Car

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    #21
    Because if they do nothing then the stock rising only benefits stockholders, not the company.

    By basically becoming a stockholder, Apple gets the advantage of the stock going up, just like everyone else. (Instead of just being a spectator.) It's what Warren Buffet said...if you think you can buy $1 for 95 cents, why wouldn't you? Right now that's what Apple feels like it's doing.

    Not only will Apple get financial benefits if things go well, it's also a HUGE show a faith to other investors that the company wants to be in the same boat as everyone else. You'd feel safer in a ship that the construction manager is riding in too, wouldn't you?
     
  22. macrumors demi-god

    Shrink

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    Location:
    New England, USA
    #22
    Your strongly declarative statements indicate an in-depth knowledge of corporate finance.

    With that in depth-knowledge, could you expand on your comment and explain your disagreement with Apple's actions.

    Thanks...:)
     
  23. macrumors 6502a

    Muscle Master

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    Location:
    Philadelphia
    #23
    Why can't they support the American economy and pay.. ALL they taxes. bring the cash back to the USA
     
  24. macrumors member

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    Aug 5, 2011
    #24
    It makes me sick that one of America's most valuable companies is allowed to pull this crap instead of just paying taxes on earned income.
     
  25. macrumors regular

    Nungster

    Joined:
    Oct 15, 2011
    #25
    They are borrowing the money so they do not have to repatriate the overseas money. The bond yield is not bad either, and in the end it would have been the wiser choice for them to pay ~2.9% over the three years buying back a stock that has the potential to go back up to $700+

    No one knows better about Apples future products and innovations than they do.

    Think about it.
     

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