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Carl Icahn Presses for Apple Shareholder Vote on Increased Stock Buyback

Either Apple uses its horde to massively increase its offerings (software and service mainly),

or buy back its stocks.

OR reduce the price of its products.
 
HiRez said:
I wonder if they are waiting for a one-time amnesty, something which has been proposed and I assume, lobbied for by many US companies.
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The corporations are pushing for tax amnesty but the fact that they haven't gotten it yet tells me that they probably aren't going to get it. All of this got wrapped up with the deficit and budget debates in Congress that aren't any closer to resolution now than they were years ago. And we also have to ask ourselves (assume we means stockholders) if Apple's treatment of the cash would be any different if it was domiciled in the U.S. instead of overseas.

proline said:
Yes it is. The stock price reflect everything- profit, cash, sales, speculation about future products, speculation about the global economy, speculation about dividend increases and buybacks, etc. With that complex mix of fact and sentiment on a backdrop of broader economic variability there is actually no way to predict whether a buyback will raise the price, lower it, or keep it the same. Teasing out issues like this is the stuff of PhD dissertations. What we do know is that the act of announcing a huge buyback would likely cause a short surge in the share price, just enough for Carl to sell out and take his 'investment' to the next target.
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Stock pricing is all about earnings, and the growth of earnings, and the factors that feed into earnings growth (some of which you mentioned). This is what stockholders buy when they invest. Shareholders own equity, they don't own assets (of which cash is one), and they don't see any part of those assets unless the company decides to share them, either as a dividend or a buyback. Otherwise they might as well be on the moon, as far as investors are concerned.

Buybacks are of tangible and moderately-lasting value to shareholders because they concentrate earnings on the shares remaining and increase EPS, other factors being equal. They also reverse dilution, which naturally occurs as companies grant shares and options to executives. That benefit would not be erased just because/if/when Icahn decides to liquidate his shares.

No Ph.D required. This stuff is Investor 101.
 
IJ Reilly said:
Either way, at some point Apple will have to address all of the overseas cash. It doesn't make any better sense to stash cash offshore than in the U.S. -- either way, it's money not doing anything useful for the company or the stockholders. The excuse that repatriating it produces a tax liability is going to wear pretty thin. It has already really. They can't keep kicking that can down the road forever.
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One can hope for some tax law changes, at the very least. And Apple does spend a lot of cash overseas, too, so it's not like it makes sense for them to bring it all into the US. I think I'd be happiest if Apple was spending more of it where it is and expanding their operations worldwide.
 
It's like public insider trading.

I kind of wish shares could only be bought in bulk by people with a proven track record or if apple could actively refuse ownership to those who are seen as gaming the system. You can guarantee that he probably borrowed money to invest in apple stock and needs to pay the piper. Same thing happens with football clubs that get bought out when the guy getting majority share ownership is actually technically putting the company into millions worth of debt on what was borrowed to buy.

Apple doesn't need to do anything with its cash apart from make great products and carry on with r&d
 
tbrand7 said:
I find it funny how this guy has the audacity to think he should have any control in Apples finacial descions. The word "investor" is not a job position my friend. Just because you invest a large sum of your money into a company, does not mean you gain any more control in what the company does or not do.
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Actually, it does, but his investment is small for a company as valuable as Apple.
 
Apple needs to tell him to pound sand, until the tax situation for business changes in the US Apple will not change its operating status (per the over seas profits). The US has the highest tax rates on business in the world.


Tom
 
Michael Goff said:
Not to sound rude, but how does "greater shareholder confidence" do anything for the consumers? Would their confidence mystically make the iPhone/iPad better or cheaper? Would it make Macs faster or cheaper, OS X less buggy? Would iOS suddenly be more efficient or gain more features?

How would the confidence of a bunch of people actually help anyone?
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Apple management would not have to spend as much time reassuring investors.

Apple would feel more confident that they can take greater risks without an investor revolt.

Apple is owned by these shareholders. The shareholders are Apple's boss. Would you rather have a boss always on your case or one that left you alone and thinks you can do no wrong?
 
PracticalMac said:
OR reduce the price of its products.[/SIZE]
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AKA throw it away? Nope. I just don't see the point of a buyback at this point, but that's because I no longer consider AAPL so undervalued (which is why I just sold).

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sirozha said:
Here's the real difference between Apple and Google. Apple is buying back shares and destroying them, thus deflating the pool of outstanding shares, whereas Google keeps issuing more shares, thus inflating the pool of outstanding shares. Additionally, Apple pays dividend, and Google doesn't. Therefore, those who are trying to benefit on GOOG must engage in market speculations to be able to extract any value out of their stock holdings, whereas AAPL shareholders can hold onto the existing shares and keep buying more because the value of their holdings is increasing as the time goes on, and the more shares they hold, the higher is their dividend yield. This pretty much covers the major difference in philosophies between the two companies. Apple is there to benefit both its customers and its shareholders, and Google is there to screw everyone.
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Meh, I'd rather just trade SPY at this point.

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mccldwll said:
Sorry to break it to you but shareholders "owning" the company is a fiction right up there with the Easter Bunny, Tooth Fairy, and Santa Clause (again, sorry for that disclosure). A modern day minority "shareholder" is more just along for the ride in the value of the stock than having any real call on the profits, or right to challenge business decisions made by the BOD or executive team. Shareholders, in general, are not the original investors and aren't seeking a "reward for risk on investment". They are buying for appreciation.
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Sigh... Look up "shareholder", and read aloud what it says. Then tell me what the board is.
 
Last edited:
you aren't investing in Apple

When you buy a stock today, unless it is during an IPO, you aren't really investing in the company. You aren't 'enabling that company' or anything like that. You are simply giving your money to ANOTHER INVESTOR. You are investing in a piece of paper, sold to you by a third-party, that you hope increases in value.

Sure, you technically have a 'vote' with your share, but it's a minuscule one that counts for pretty much nothing. None of that money goes to Apple to allow them to do more or do better. It goes into the pocket of an Investor, after the brokers take their cut.

Only people who bought shares during the initial public offering were risking their money directly on the companies success and contributing to the companies goals. Without them, there would be no Apple. They were the people who provided the cash to get the company off the ground.

Today, you are pretty much just trading baseball cards. It doesn't make the Yankees any better to sell a vintage card for a profit to an e-bay collector.

Or, for another analogy, investors in Apple are like people betting on horses. You can buy a ticket, and you hope for your horse to finish first, but it brings you no closer to owning the horse, nor should you be expected to have a say in how the horse is managed.

Sure, a buy-back might raise the value of what you hold, but it will only matter to people who hold massive amounts of stock, like Icahn, while compromising the ability of the company to be successful longer term, which is the only way you can expect long term growth of your pieces of paper.

In the list of things apple could spend that money on, buying paper from investors seems like the worst possible thing to spend it on. They might as well just throw the money out the window. Those shares are with worth exactly ZERO to Apple.

Demanding Apple pay you for your speculation on some piece of paper you bought from some other dude is pretty ballsy, although rather common.
 
HiRez said:
One problem, correct me if I'm wrong, is that most of that money is not in the US. Meaning they would either have to deplete their US reserves (not smart) or pay a significant tax bill on repatriating the money to purchase the shares.
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If I remember correctly from an older MacRumors article, taking the loan out somehow enables Apple to do this without paying US taxes.

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meecect said:
When you buy a stock today, unless it is during an IPO, you aren't really investing in the company. You aren't 'enabling that company' or anything like that. You are simply giving your money to ANOTHER INVESTOR. You are investing in a piece of paper, sold to you by a third-party, that you hope increases in value.

Sure, you technically have a 'vote' with your share, but it's a minuscule one that counts for pretty much nothing. None of that money goes to Apple to allow them to do more or do better. It goes into the pocket of an Investor, after the brokers take their cut.
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No, that's not true. If so, why would Apple even go public? Also, the vote for ONE share is minuscule, but if you have a lot... which Icahn doesn't really have. He owns less than 1% of the corporation.
 
Apple does have too much money, and what they should do with some of it is give rent subsidies to the middle class who are losing their homes to tech employees.:eek: Their success (with Google/Facebook/Twitter/etc.) is being felt here in the Bay Area and it isn't pretty. What about the poor? We lost them along time ago.
 
proline said:
The correct way to handle the overseas cash is to invest it in doing more R&D overseas, and indeed Apple is gradually doing that. It would be nice if Apple could bring back that money to do the R&D in the U.S., but paying that huge tax bill just doesn't make sense for shareholders.

What Apple management knows, and you seem to be missing, is that Apple is in a very volatile business. They are always a misstep or two from being back in the red. Remember, in 2007 Motorola, Nokia, and RIM were all doing great. Now they are all going under or sold. Apple management also hasn't forgotten the days of having to grovel before Bill Gates. Apple needs an insurance policy and keeping their cash around $100,000,000,000 is a good one. Their current dividend, buyback, and investment programs are keeping cash pretty stable- time to leave well enough alone.
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I've been hearing the exact same thing for years and years, since the cash hoard was only 15% of what it is today. It doubles, then doubles again, then doubles again, and still the tune is the same, as if suddenly, Apple is going to have an a-hah moment and find the perfect place to spend $150b.

Remember, we are talking $1b a week, every week, and growing. Apple has never come even within hailing distance of being able to invest that much in R&D. Maybe you think they should be spending it just because it's there. Maybe you think they should be chasing goofy, unrelated projects, like Google does, and letting corporate focus go to hell in a handcart. Colonies the moon, anyone?

Your second point is far scarier than you seem to know. For Apple to need any part of their cash accumulation to fund operations, this would mean that they had gone from being massively profitable to unprofitable. Do you want to be a shareholder if that scenario is even remotely possible? If Tim Cook even hinted that Apple's business might be so fragile that they need to bank against corporate armageddon, would that increase your confidence in the company? If not that, then what's the money for? This is what nags at the backs of investors' minds, and has for years -- whether you know it or not.

And the "grovel before Bill Gates" story is basically a myth. Don't get me started on that one.
 
9000 said:
No, that's not true. If so, why would Apple even go public?
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Well, when they went public, they likely did need the money, like most companies when they initially go public. But decades later, this is no longer the situation. Every share they offered was bought, and now all of those shares have been bought and sold amongst third parties many many many times over.

When you buy a share of Apple, Apple doesn't see a dime. You are buying it from another investor, who either lost a little or gained a little in the process.

The share price could go to zero tomorrow and not affect apple. It might make employees rewarded with stock upset though ;-)
 
carmenodie said:
Call me naive but you just can't go into your company's safe and take money. You'd go to jail. Stockholders can't just ask Tim to fork over money. If they want money let them liquidate their effing stock.
Also, why would Apple even consider borrowing 150 billion to buy back their own fu**** stock?
1) Apple would have to pay back, with interest, 150 billion to the banks.
How's that possible. Oh, because of the hype surrounding the iwatch and the Apple branded tv! Two rumored products!
But Apple makes over half its money from the iPhone. One goddamn, disposable product.
And how long would that elevated stock price stay up? A few days? Hours? Just enough time for Carl to cash out!!!
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You're naive.

If you own the company, you can absolutely go into your company's safe and take money. It's a little more complicated when there are multiple owners, as in the case of a corporation. There are procedures that must be followed, and the multiple owners are entitled to different amounts of cash depending on their share of the company. Now, just because the money is there doesn't mean it's in the owners' best interests to take it out of the safe. But if the money is not being spent to grow the business, as is the case with Apple, then it's time for Apple's safe to be opened.

As for why Apple would consider going into debt to pay out dividends or buy back stock, that's simply a tax thing. Interest rates are way, way lower than tax rates to bring money in from overseas. It's a smart business move, and since Apple is still making money in the US, they can pay off that debt pretty quickly.

If you don't know why AAPL would rise after a stock buyback, you clearly don't understand the basics of supply and demand, or P/E ratios, or any other really basic economic realities. There will be a correction, sure, as many shareholders cash out, but with less shares out in the world, each share is a bigger slice of the pie, and the stock price will stabilize higher than it was before the buyback.
 
I love a guy who shows up late with a handful of cash, and thinks he owns the place.
 
tbrand7 said:
I find it funny how this guy has the audacity to think he should have any control in Apples finacial descions. The word "investor" is not a job position my friend. Just because you invest a large sum of your money into a company, does not mean you gain any more control in what the company does or not do.
Click to expand...

Well, while I agree that Carl Icahn is annoying, an investor IS a part owner of the company and he DOES have a right (due to buying a portion of the company) to try to get the company to do with the money what he wants them to.

Someone said he owned 1% ? I don't know if that's true but 1% of a $500 billion company is a significant investment.
 
mrxak said:
Apple management would not have to spend as much time reassuring investors.

Apple would feel more confident that they can take greater risks without an investor revolt.

Apple is owned by these shareholders. The shareholders are Apple's boss. Would you rather have a boss always on your case or one that left you alone and thinks you can do no wrong?
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And if they buy more and more quickly, then Carl will keep asking for more. He's never going to be happy.
 
Am I the only one who gets the feeling we shouldn't let this guy around grade schools from looking at this picture?
 
meecect said:
Well, when they went public, they likely did need the money, like most companies when they initially go public. But decades later, this is no longer the situation. Every share they offered was bought, and now all of those shares have been bought and sold amongst third parties many many many times over.

When you buy a share of Apple, Apple doesn't see a dime. You are buying it from another investor, who either lost a little or gained a little in the process.

The share price could go to zero tomorrow and not affect apple. It might make employees rewarded with stock upset though ;-)
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You're right that they don't get money when you buy stock (except initially), but good stock performance allows a company to take loans more easily. Also, a company worth more is harder for other companies to buy out. Probably not issues for Apple specifically, though many executives are shareholders.

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eyehop said:
Apple does have too much money, and what they should do with some of it is give rent subsidies to the middle class who are losing their homes to tech employees.
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Sorry to disappoint you, but they won't do that.

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mccldwll said:
But tulips are so much prettier!
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Thank you for saying this. Best response possible.
 
kevinthebright said:
Apple should be a bank. I trust them more than the current banks. They have strong reserves and banking is a perfect digital, global business.

For shareholders, the cash is priced into the stock. In a perfect world, isn't using it to reduce the number of shares outstanding share price neutral? Take the cash out without reducing the shares, e.g., a dividend, reduces the value of the shares by the amount of the dividend. A repurchase does the same.
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No, you're completely wrong. A repurchase simultaneously reduces the value of a company's holdings while making each share of the company's holdings and earnings larger.

Stock prices are generally based on the earnings of a company, and prospective earnings, not its assets in the event of liquidation. As long as Apple keeps earning, its stock has significant value. Reducing the number of shares means a straight-up increase in the earnings per share. The company overall may be worth slightly less, if liquidated, but the stock is worth much more and the price will come up. A buyback is a fantastic way of increasing shareholder value, and a very smart move if a company has excess cash and the share price is lower than it should be. Everyone knows this, it's just a question of how big a buyback to make. Some investors like Icahn think it should be a very large buyback. Others think it should be a smaller buyback. Apple has their own opinion. But we all know a buyback is gonna happen, it's just a matter of size and timing.
 
akm3 said:
Well, while I agree that Carl Icahn is annoying, an investor IS a part owner of the company and he DOES have a right (due to buying a portion of the company) to try to get the company to do with the money what he wants them to.

Someone said he owned 1% ? I don't know if that's true but 1% of a $500 billion company is a significant investment.
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Maybe he does own 1%, but 1% shouldn't be able to tell the other 99% what to do. No matter how much that 1% is worth it's still only 1%.
 
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