Carl Icahn Increases Apple Stake to $2.5 Billion, Requests Immediate $150 Billion Stock Buyback

[jdechko]

I'm surprised the reactions to this are so negative. Icahn may or may not be a good guy, but what does that have to do with his idea? I've thought for a long time that they should buy back more. They have a HUGE pile of cash, the stock is undervalued, and it shows faith in the company and its direction. $150b might be a bit much, but I don't see where the idea is bad.

Because Icahn doesn't care about Apple being undervalued. He cares about the money he could make. After the buyback, Apple is still worth the same $500 Bn, but with approximately 1/3 fewer total shares, Icahn's shares are worth about 33% more. He'd stand to make about $800 million by doing jack.

Icahn's idea has little to do with making Apple more valuable and everything to do with making himself richer.

 

[4jasontv]

Why would a company have a bunch of cash? Two reasons, they are either planning to spend it as soon as they have enough or find just the right opportunity, or they can't figure out what to do with it.

I have a third reason. If they want to buy something the are always taken seriously. They can make an offer, or three and buy them all or none without arousing any suspicion. That's worth a lot, and it may be that the money they save (and assests they aquire) by getting in quickly and and quietly is worth the imagined loss. For many startups, waiting for a better offer is suicide.

 

[Peace]

This guy is nuts if he thinks Apple is going to spend all it's cash on a buyback.

He's obviously trying to manipulate Apple's stock in order to sell later and make a ton of money.

 

[brig2221]

Because Icahn doesn't care about Apple being undervalued. He cares about the money he could make. After the buyback, Apple is still worth the same $500 Bn, but with approximately 1/3 fewer total shares, Icahn's shares are worth about 33% more. He'd stand to make about $800 million by doing jack.

Icahn's idea has little to do with making Apple more valuable and everything to do with making himself richer.

I could not have said it better myself. Apple would be significantly cash constrained as a results as well, which would put them at a distinct disadvantage against the likes of Google and Microsoft who both currently have very large cash hoardes themselves.

This guy is nothing but a vampire, trying to suck as much money out of companies he can (through legal extortion) whenever he sees an opportunity to make a quick buck doing absolutely nothing and providing absolutely no value to the company or it's customers.

 

[synergy]

Well…

If you owe the bank $1000 and can't pay it back, you have a problem.
If you owe the bank a million and can't pay it back, the bank has a problem.

If you owe 1.5 billion… Whoever gave you the 1.5 billion can't go after the 500 million, because if anyone notices, he will lose his job.

Heck, if its a US or European bank the bank can wring the individual for all their worth and the Fed will cover the rest. Banks no longer have problems of bad debts thanks to the Fed.

 

[IJ Reilly]

I think the best way to combat Carl Icahn's actions is that long term share holders in Apple should go to the SEC's website and file a complaint. I did that today.

Let us know how that complaint works out for you. My prediction is it goes straight into the digital dustbin, since nothing Icahn has said or done appears to be a violation of SEC rules.

 

[synergy]

I'm surprised the reactions to this are so negative. Icahn may or may not be a good guy, but what does that have to do with his idea? I've thought for a long time that they should buy back more. They have a HUGE pile of cash, the stock is undervalued, and it shows faith in the company and its direction. $150b might be a bit much, but I don't see where the idea is bad.

Only Tim and company know that for sure, right? Your speculation is much like others speculating that anything proposed by Icahn is bad for Apple. The only people who are in the know on that is the upper level leaders at Apple. Maybe they have a plan for the cash hoard, maybe they don't.

 

[Teste]

Obviously this is not a forum for finance majors, because there have been some of the stupidest comments I have ever seen here.

Indeed. The finance major wannabes are the worst of the bunch. For example...

Why would a company have a bunch of cash? Two reasons, they are either planning to spend it as soon as they have enough or find just the right opportunity, or they can't figure out what to do with it. Which of those do you think Apple is?

That is ridiculous. Apple has often used their resources to buy smaller companies. They can be seen as major players when showing interest over a company since everyone knows they have a lot of resources, even when they make a small bid.

Throwing this - something that could actually buy something of value, improving the company - into something as useless as shares is simply ridiculous.

 

[s2mikey]

Because Icahn doesn't care about Apple being undervalued. He cares about the money he could make. After the buyback, Apple is still worth the same $500 Bn, but with approximately 1/3 fewer total shares, Icahn's shares are worth about 33% more. He'd stand to make about $800 million by doing jack.

Icahn's idea has little to do with making Apple more valuable and everything to do with making himself richer.

Right - and, lets not forget how many lives this pig has ruined through layoffs and mandatory attrition being forced onto companies that he messes with. Anyone in the workplace that sees this clown in the hallway had better het their resume updated.

Alls these parasites like Icahn do is:

1) Swoop in and spew their crap
2) Setup some fake deal that appears to be valuable
3) Buy stock cheap or at its curent price
4) Get rid of lots of employees since they cut into the bottom line
5) Sell the stock once Wall Street has a big circle-jerk over the "lean-ness" of the company now and the the stock rises
6) Leaves in the middle of the night to go ruin more peoples lives and make another 567 eleventy trillion billion which he'll pay no tax on.

Did I miss anything? Didnt think so.

 

[cuppajoe]

This man bankrupted MARVEL

Tim Cook never should have given him the time of day. Steve Jobs would never have taken this guy's call much less "have lunch" with him. Carl Icahn may have made a recent windfall from Netflix but he also took it in the shorts with Blockbuster (long after everyone else bailed out) and let's not forget - this man bankrupted Marvel. MARVEL!

 

[lildimsum7]

This guy is nuts if he thinks Apple is going to spend all it's cash on a buyback.

He's obviously trying to manipulate Apple's stock in order to sell later and make a ton of money.

It's excess cash, nothing to do with normal spending on operations. How else is Apple going to employ that cash in a way more beneficial to shareholders?

Argument from the other side: Buffett trusts Apple's judgment and thinks Tim shouldn't listen to Icahn. Maybe they could hold it for opportunistic buybacks if the price becomes more distressed or for acquisitions at a reasonable price.

 

[Peace]

It's excess cash, nothing to do with normal spending on operations. How else is Apple going to employ that cash in a way more beneficial to shareholders?

Argument from the other side: Buffett trusts Apple's judgment and thinks Tim shouldn't listen to Icahn. Maybe they could hold it for opportunistic buybacks if the price becomes more distressed or for acquisitions at a reasonable price.

Excuse me. I should have said all of it's excess cash.

Besides most of it's excess cash is sitting offshore where it isn't paying taxes.

 

[nutellaface]

You guys do know that Apple's #1 responsibility is to the shareholders right? As a shareholder that currently holds 2.5B worth of stock, I don't see it as unreasonable for Icahn to meet with Tim and ask for certain things that he thinks will be beneficial to shareholders.

Geez...

 

[SusanK]

Ichan definitely wants a seat. TC needs to decide if he is the boss at Apple or is he is positioning himself for a new director.

No, this would not have crossed Ichan's mind if Steve was CEO. Predators avoid strength. Weakness is catnip to them.

 

[s2mikey]

You guys do know that Apple's #1 responsibility is to the shareholders right? As a shareholder that currently holds 2.5B worth of stock, I don't see it as unreasonable for Icahn to meet with Tim and ask for certain things that he thinks will be beneficial to shareholders.

Geez...

Nor do I see anything wrong with lots of other people finding him to be a slimy cockroach seeing as they dont benefit whatsoever from his shenanigans. Perspective, perspective.

The world would be a better place if all companies were privately owned. This shareholder vs employee vs other parties paradigm causes so much grief and creates a lot of animosity. I tell ya.

 

[NewbieCanada]

A hitman costs far less than $150 billion.

And a Microsoft Surface costs much less, is perfectly legal and is just as likely to prove fatal in a 77-year-old.

 

[tdmac]

I don't fully understand everything about buybacks. However I have a few questions.

1) Don't know the total number of Apple Shares, So if Apple immediately buys back $150 Billion of shares and Icahn's are sold as part of this, what percentage of Apple would he then own? I know he has 2.5 billion now invested but not sure how many shares. Don't also know what the current majority stake holds or if this would move him into a majority shareholder position.

2) So Apple takes on more debt to finance a share buyback equal to its current cash on hand, How exactly do they ever pay off that loan? The cash is all overseas and would have to pay allot of tax to bring it back to pay off the debt. While Icahn says that Apple earns enough in cash annually to afford to do this amount of a buyback (current projection is 50 billion for this fiscal year), it overlooks the same issue in that the 50 billion is more than likely money earned overseas. Thus, can't use it to pay back the debt. How much does Apple profit (after taxes and annual dividends) on business conducted strictly in the US? This to me is the number you need to look at as usable cash. How long would that take to pay off the 150 billion?

3) So expanding on #2 above, the only way to actually pay off the debt is to sell shares back into the market once they have risen high in value. However, what do you think it will do to he stock price when you release 150 billion dollars worth of stock back into the open market? We will be right back here again no?

 

[tdream]

If I can borrow money, use that money to make more money than I would have by "saving up for stuff" it's in my best interest to do so.

The fact that you're comparing a multibillion dollar stock buy back to people's household credit card debt is laughable.

Yeah, that's exactly the reason the country is in the dumps. And the reason why financial institutions are required to have a massive amount of liquid assets on tap to offset potential losses, multiple factors higher than before the crash.

What's laughable is you don't get the simple comparison. What don't you get how credit works? Icahn wants to leverage Apple's assets to get the loan to buy back shares, that's the same as credit. It's all about the borrowing.

It's the same for a lot of people getting loans, always look at the upside, never look at the downside...

 

[Bibbler]

Yes but it is NOT the purpose of running a company such as Apple.

BS - A publicly traded company is a publicly traded company.....

As Tim and Co made clear on Tuesday, They are about GREAT products....

WOW, ... maybe you ought talk to "Carl" and explain what "Tim" told you..

See the Designed in California video if you still do not understand. Someone should show it to Mr. Icahn, but I do not think he would get the point.

Your pal "Tim" works at the pleasure of the board. Rather than "show it to Mr. Icann", maybe "Tim" ought to explain it to the stakeholders (The owners of the company) that rather than maximizing shareholder value, he's all about making "Great Products".... I seriously doubt your pal "Tim" would be around very long...

I'm sure your "Apple's all about great products" is a popular line among the "investing experts" who have posted in this thread - I seriously doubt it would impress major stock holders....

 

[Bear]

He wants Apple to spend all their cash to buy buy back stock and cause the following issues:

• Apple won't have the cash for contracts keeping their supply costs down. Look at how Apple has used that cash in the past.
• Apple also tends to pay cash for companies they buy. Where would tghey get the cash if they use it all to buy back stock?
• Ichan's stake in Apple becomes a larger percentage giving him more of a voice. Can we say hostile takeover and destruction of Apple for greed?

 

[IJ Reilly]

I don't fully understand everything about buybacks. However I have a few questions.

1) Don't know the total number of Apple Shares, So if Apple immediately buys back $150 Billion of shares and Icahn's are sold as part of this, what percentage of Apple would he then own? I know he has 2.5 billion now invested but not sure how many shares. Don't also know what the current majority stake holds or if this would move him into a majority shareholder position.

2) So Apple takes on more debt to finance a share buyback equal to its current cash on hand, How exactly do they ever pay off that loan? The cash is all overseas and would have to pay allot of tax to bring it back to pay off the debt. While Icahn says that Apple earns enough in cash annually to afford to do this amount of a buyback (current projection is 50 billion for this fiscal year), it overlooks the same issue in that the 50 billion is more than likely money earned overseas. Thus, can't use it to pay back the debt. How much does Apple profit (after taxes and annual dividends) on business conducted strictly in the US? This to me is the number you need to look at as usable cash. How long would that take to pay off the 150 billion?

3) So expanding on #2 above, the only way to actually pay off the debt is to sell shares back into the market once they have risen high in value. However, what do you think it will do to he stock price when you release 150 billion dollars worth of stock back into the open market? We will be right back here again no?

Apple currently has 908 million shares outstanding for a market cap of $483 billion. In a buyback, Apple buys shares over time on the open market. They don't buy anyone's shares in particular.

If Apple took all of Carl Icahn's advice (doubtful) and bought back $150 billion more in shares, that would reduce the outstanding shares by about 30% to around 635 million, assuming they could all be purchased at the current price (also doubtful). If that happened Icahn's part of the company would be increased by a like amount, to something around 0.70% of the company. Not even close to a majority. This is not what he is after.

According the Icahn plan, the debt would be serviced out of Apple's very ample cash flows. I should think domestic cash flows would suffice to service the debt and pay the dividend. If it doesn't, then the plan to borrow against cash flows makes no sense.

Once Apple buys back shares, they aren't owned by Apple or anybody else. They disappear. Nobody is talking about turning around and selling more shares of AAPL to service any debt. It would make no sense to buy back shares only to create and sell new ones.

----------

He wants Apple to spend all their cash to buy buy back stock and cause the following issues:

• Apple won't have the cash for contracts keeping their supply costs down. Look at how Apple has used that cash in the past.
• Apple also tends to pay cash for companies they buy. Where would tghey get the cash if they use it all to buy back stock?
• Ichan's stake in Apple becomes a larger percentage giving him more of a voice. Can we say hostile takeover and destruction of Apple for greed?

No, no, no, and no.

 

[Nunyabinez]

Indeed. The finance major wannabes are the worst of the bunch. For example...


That is ridiculous. Apple has often used their resources to buy smaller companies. They can be seen as major players when showing interest over a company since everyone knows they have a lot of resources, even when they make a small bid.

Throwing this - something that could actually buy something of value, improving the company - into something as useless as shares is simply ridiculous.

First you should not make baseless assumptions about people's backgrounds. It pisses me off that I have to play this card, but I teach in a business school.

Yes, Apple often acquires firms and that is a smart thing. But you don't need $150,000,000,000.00 to enable you to buy companies that add strategic capabilities to your company. In fact, if their stock was even more valuable, they would easily purchase these companies with stock rather than cash.

And prior to this I was a marketing manager for Intel and you also don't need that kind of cash to build a fab even though fabs are ridiculously expensive.

I don't think Apple needs to give up all their cash, but anyone who thinks that they will be hobbled in their ability to do what they need to unless they have a ludicrous amount of cash sitting around doesn't understand finance at all.

 

[k2k koos]

Don't

EVER, trust a banker.

Apple is an engineering company, not an investment company. Stay to your roots, DO NOT give way to the whims of bankers and investment companies. They're only in it for the money!!
Far , far removed from the values that Apple (publicly) announces. YOU should not be in it for the money (sure make a profit is okay to sustain a healthy company) but to make the best products, for a better world.

To make someone stupid rich beyond comprehension is NOT conductive to a better world, it only feeds the few, and does nothing for the many.

STICK TO YOUR ROOTS! INNOVATE! Only those who cannot do that, try to make money with financial tricks and mechanisms.
The only true way of making a profit is by selling a product, not by endlessly manipulating numbers.

Apple doesn't need investors, it has plenty of cash to be it's own!

 

[Nunyabinez]

Stay to your roots, DO NOT give way to the whims of bankers and investment companies. They're only in it for the money!!
Far , far removed from the values that Apple (publicly) announces. YOU should not be in it for the money (sure make a profit is okay to sustain a healthy company) but to make the best products, for a better world.

This is incredibly naive. When ever you hear Tim Cook say "we are out to make the best products in the world." You should tag on at the end "so that we can make lots of money."

If they made great products but were not profitable then they would not be around.

If ALL they cared about was making great products then they wouldn't be priced as luxury items with extremely high margins.

Do really think that a company that ONLY cared about making great products could amass $150 billion?

 

[subsonix]

1 + 1 = 3, my unkle is a mathematician!