Sidebar Sidebar
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.

Carl Icahn Asks for Accelerated Stock Repurchase Program in Letter to Apple's Tim Cook

M

mistertomlinson

macrumors 6502
Dec 22, 2007
333
19
I'm not saying I agree with his antics, but I have warmed up to his perspective. When Apple decided to sell stock in their company, they forfeited ownership and as shareholders, Icahn is right to say we should have a voice.

While, ultimately I trust Apple to make the best choice for the company, I can also understand Icahn's persistence in urging the return of money to shareholders via buybacks as I don't think anyone disagrees $130 billion of cash is a bit superfluous and the people who OWN the company should be entitled to some of this excess cash, considering the alternative of letting it sit in a bank.

Again, I'm not taking sides. I wouldn't be upset if Apple didn't change their buyback program or increase dividends anymore than is expected. I'm just saying, I believe he has the right to do these things as someone who owns a considerable portion of the company and I don't think it's entirely fair for him to be loathed.
 
D

Daalseth

macrumors 6502a
Jun 16, 2012
599
306
JHankwitz said:
But, he has 53 billion dollars worth of stock. Because of this, he owns a big chunk of Apple, and as a majority owner, Apple has to at least listen.
Click to expand...

He's a significant owner but I'm pretty sure he's not Majority Owner. If he were he could just force the company to do what he wanted.
 
cocky jeremy

cocky jeremy

macrumors 603
Jul 12, 2008
6,130
6,401
JHankwitz said:
But, he has 53 billion dollars worth of stock. Because of this, he owns a big chunk of Apple, and as a majority owner, Apple has to at least listen.
Click to expand...

They can pretend to listen to him. They don't really care what he says or thinks.
 
P

prism

macrumors 65816
Dec 6, 2006
1,060
389
Buybacks are just cheap tricks to to jack up the stock price, no real value creation here but then again, the works of a vulture.
 
TallManNY

TallManNY

macrumors 601
Nov 5, 2007
4,742
1,594
Letter

The whole letter is a good read, especially for any Apple Fan Boy. I like this quote:

"Now that iPhone offers a larger screen size, its price competitiveness in the premium phone market is clear, as a premium Android phone such as the Galaxy S5 and Note 4 sells at a similar price point to the iPhone 6 and 6+ respectively. The choice between them is analogous to the choice between a Volkswagen over a Mercedes at the same price, and unlike a Mercedes, the $649 cost of an iPhone 6 is affordable for the mass market, equating to just $20 per month over a two year period (including a $170 estimated resale value of the phone at the end of two years, excluding financing and taxes)."

They (and keep in mind that Icahn did not write this letter, his lawyers and PR folks did) make good points. And ones that the main stream media misses continually.

Main stream media misses this point continually (and so do a lot of Apple's competitors):

"There are obviously lower priced competitive offerings, but the marginal premium one pays for an iPhone is not significant for meaningful percentages of the global population. As we explained earlier in this letter, the effective cost of an iPhone 6 is just $20 per month. Considering the increasing amount of time users spend with their mobile devices, and thereby the practical value of a noticeably superior product, it is hard to imagine why a consumer would choose an inferior phone when the marginal cost difference is so small."
 
O

oatman13

macrumors regular
Feb 14, 2013
233
72
mistertomlinson said:
I'm not saying I agree with his antics, but I have warmed up to his perspective. When Apple decided to sell stock in their company, they forfeited ownership and as shareholders, Icahn is right to say we should have a voice.

While, ultimately I trust Apple to make the best choice for the company, I can also understand Icahn's persistence in urging the return of money to shareholders via buybacks as I don't think anyone disagrees $130 billion of cash is a bit superfluous and the people who OWN the company should be entitled to some of this excess cash, considering the alternative of letting it sit in a bank.

Again, I'm not taking sides. I wouldn't be upset if Apple didn't change their buyback program or increase dividends anymore than is expected. I'm just saying, I believe he has the right to do these things as someone who owns a considerable portion of the company and I don't think it's entirely fair for him to be loathed.
Click to expand...

The buyback won't give people part of the $130 billion in cash. What it would do is cause the share price to go up because Apple would essentially be buying its own stock in large quantities which would drive the share price up. However, the problem with doing this fast is that slugs like Carl Icahn will dump their stock the moment Apple buys back shares. What this will do is cause the share price to go down, giving him a chunk of the $130 billion. Then since AAPL will go down others will follow and then he'll buy the stock back within the same week. It's a way for him to get some of that reserve cash instead of the average joe getting it.

-------
Then again, I've always been a huge advocate of AAPL buying its own shares because it gives them the management a larger control of the company's position. However I've always been against dividends... I strongly believe that the reserve cash puts Apple in a very strong position to invest its money without any sweat.
 
BuddyTronic

BuddyTronic

macrumors 68000
Jul 11, 2008
1,865
1,473
jonnysods said:
This guy is so shifty!!!!
Click to expand...

Did you guys read his letter?

He praises Apple

He is totally right, Apple has been held back. Bendgate and all this nonsense for years.

Apple is way undervalued.

Interest rates are so low, Apple's best investment is to buy it's own stock. And they are doing that.

Why so negative on Carl Icahn?
 
M

mbh

macrumors 6502
Jul 18, 2002
400
73
JHankwitz said:
But, he has 53 billion dollars worth of stock. Because of this, he owns a big chunk of Apple, and as a majority owner, Apple has to at least listen.
Click to expand...

The article says he owns 53 million shares. Apple has about 6 billion shares issued. That means he owns about 0.88% of Apple shares. Not even one percent. He'd have to own 50%+ of Apple shares in order to be a majority owner.

Imagine if 112 other people owned as much of Apple as our friend Carl. Then imagine that each one of them thought they could lecture Tim Cook the way Carl does. Scary.
 
TallManNY

TallManNY

macrumors 601
Nov 5, 2007
4,742
1,594
Another quote:

"Mutual funds today face fierce competition with index funds that simply match the S&P500 index (in which Apple has a weight of 3.4%). Surprisingly, many mutual funds are underweight Apple, meaning that Apple represents less than 3.4% of their overall portfolio. "

My stock trader friend makes this point to me all the time. Basically, at some point, the mutual funds have to increase their Apple position or else they are going to risk losing their jobs.
 
C

cwt1nospam

macrumors 6502a
Oct 6, 2006
564
129
oatman13 said:
The buyback won't give people part of the $130 billion in cash. What it would do is cause the share price to go up because Apple would essentially be buying its own stock in large quantities which would drive the share price up. However, the problem with doing this fast is that slugs like Carl Icahn will dump their stock the moment Apple buys back shares. What this will do is cause the share price to go down, giving him a chunk of the $130 billion. Then since AAPL will go down others will follow and then he'll buy the stock back within the same week. It's a way for him to get some of that reserve cash instead of the average joe getting it.

-------
Then again, I've always been a huge advocate of AAPL buying its own shares because it gives them the management a larger control of the company's position. However I've always been against dividends... I strongly believe that the reserve cash puts Apple in a very strong position to invest its money without any sweat.
Click to expand...
The more Apple buys back, the greater control this slime bucket will have over the company. When he has enough control, Apple will turn into another also ran in the tech industry, chasing market share, sacrificing quality, and losing profitability. He'll have made his money, but the rest of us, especially the customers, will lose.
 
Yaboze

Yaboze

macrumors 6502a
May 31, 2007
796
275
The Garden State
Apple's going to have a good Q3/Q4.

The bigger iPhones are exactly what people wanted. Apple listened and they are selling like crazy, especially the 6+. I read another article saying that Samsung had recent losses and that their screen size was the only advantage they had over Apple. Now it comes down to the OS and ecosystem, which was always better on iOS, IMHO.
 
5

5105973

Cancelled
Sep 11, 2014
12,132
19,733
MacSince1990 said:
So true LOL! And look at those nails. Jesus. I've literally noticed a total of maybe three other guys' fingernails in my life, and his are just.... he looks like a male witch.
Click to expand...

He IS creepy looking. I am not referring to attractiveness or lack thereof, as it is possible to be unattractive and look completely benign. Unfortunately I recognize that look. Many of my coworkers had it when I worked mercifully briefly for a large brokerage firm. I say "mercifully" because that was the only company I ever worked for where nobody could have a conversation that didn't revert back to money. Any topic, be it sports or literature or family and home had to circle back to the monetary value of the subject. It was a soul-sucking environment and I jumped ship first chance I got.

And eeks, his nails are longer than mine and I'm a woman who does sometimes wear nail polish. I wouldn't be surprised to see claws like that around a poisoned apple. ;)

Even though some members here have brought up valid points in favor of doing what this fellow wants, my instinct is to want to see Apple do the opposite of what he wants.
 
TallManNY

TallManNY

macrumors 601
Nov 5, 2007
4,742
1,594
oatman13 said:
The buyback won't give people part of the $130 billion in cash. What it would do is cause the share price to go up because Apple would essentially be buying its own stock in large quantities which would drive the share price up. However, the problem with doing this fast is that slugs like Carl Icahn will dump their stock the moment Apple buys back shares. What this will do is cause the share price to go down, giving him a chunk of the $130 billion. Then since AAPL will go down others will follow and then he'll buy the stock back within the same week. It's a way for him to get some of that reserve cash instead of the average joe getting it.

-------
Then again, I've always been a huge advocate of AAPL buying its own shares because it gives them the management a larger control of the company's position. However I've always been against dividends... I strongly believe that the reserve cash puts Apple in a very strong position to invest its money without any sweat.
Click to expand...

In the letter Icahn says that they will not sell back their shares to Apple at any price. Icahn has done nothing but buy more Apple stock now for years. He could do what you are saying, but has not done so at anytime recently and Apple has been doing a huge buyback now for well over a year.

Apple has absolutely no need for $166 billion dollars to do an "investment". Apple's largest purchase ever was for Beats and that was $3 billion. Also, any large acquisition could be done with a stock merger and it would use no cash. Finally, if Icahn is only half right about his predicted success of iPhone 6 in the next year, then there are tens of billions of dollars of more cash coming.

And keep in mind, that any large acquisition of another large company would mean a complete change of Apple culture. Apple could acquire Facebook but I don't want the company culture shift that that would create. I want Apple to say Apple and that means not adding 20,000 new employees in one fell swoop. That means not adding Mark Zuckerberg of Elon Musk as co-CEO. And any $100 billion level acquisition is going to mean doing something like that.
 
gnasher729

gnasher729

Suspended
Nov 25, 2005
17,980
5,565
JeffyTheQuik said:
With a P/E of 16, AAPL is about right. Should the earnings go up to, say, $12/share, then I'd see a $200/share as reasonable.

Buying them back is one way. Another is to get earnings higher.
Click to expand...

If Apple buys back shares for one billion dollars, then the value of the company is reduced by one billion dollars. That's compensated for by the fact that there are now fewer shares, so the value of the company is divided by fewer shares.

If Apple buys shares at exactly what they are worth, that's pointless. If Apple buys shares at a higher price than they are worth (because the share price is too high), that's bad because it reduces the value for the remaining share holders, and I don't think you can make an argument that Apple owes anything to share holders selling their shares. If Apple buys shares at a lower price than they are worth, that's a good thing because the value for the remaining share holders goes up.

Apple is quite high at the moment, so buying shares is not that good an idea. If Apple dropped to $90 or $80, then they should buy shares.
 
You must log in or register to reply here.
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.
Top Bottom