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

[gnasher729]

Exactly, Gross worth is meaningless. If you have 500 million in cash and assets, but you owe 1.5 billion, you are not rich, you are worse than broke. The average person living in the shelter is better off than you.

Edited to change stupid math error.

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.

 

[Freida]

I can count because I counted the difference between the 60 cents and 75 cents since that's all they lost. In his example. The 2$ has nothing to do with the topic at hand. You need to learn to count. Second, i have said this what 3 times? So I guess you need to learn to read. Funny how that works out, no? You insulting someone's intelligence when it is your intelligence which shows to be lacking.

Also I have something to do in 5 mins so I won't be replying anymore to tell you how you're wrong since I have better things to do. Bye

OMG, you must be stoned! He said that the little investor bought at $2 so your calculation is incorrect! It's your intelligence and eyes that need checking

 

[gregorsamsa]

If Apple followed this guy's advice for a $150bn stock buyback, it'd be one of their biggest mistakes since maybe they allowed the late, great Steve Jobs to leave in 1985, a hiatus that lasted until his return in 1997.

 

[leftywamumonkey]

Edit: Wrong article!

 

[Bibbler]

Hogwash! Carl Icahn doesn't do ANYTHING that isn't conceived to make him the biggest bundle of cash.
Mark

That's the purpose of investing..

 

[IJ Reilly]

It depends on the intent of the speaker. If you can show, the statements were made with the intent to change the value of the stock, it is manipulation. One example, If I were to come out and say, I THINK, Apple will double in the next 60 days, then when the stock went up, I sold, I would be manipulating the stock. If I were to come out and make lots of true statements about how Apple is a cool company and list lots of reasons why it is undervalued (all statements true) then sell the next day, I would be manipulating the stock.

The intent has to be to deliberately mislead. Stock analysts make predictions and offer their opinions all the time. So long as their intent is not to be deliberately false or misleading, then this is not only perfectly legal, it's their job.

 

[joecool99]

someone shoot the crying puppet already.

 

[Zellio]

What an ugly ass

 

[IJ Reilly]

That's the purpose of investing..

This seems to come as a horrifying discovery to some.

 

[NotClueless]

Basic Finance

I know this will likely get down voted, but let me explain something. Icahn is not suggesting Apple use all its cash to buy back the stock; he is suggesting Apple borrow the money to do so. Because of its financial strength and because the government is suppressing interest rates, Icahn believes Apple could borrow $150 billion at 3% (based on their recent bond sales, they would likely pay less). Interest payments are tax deductible so Apple's effective interest would be 2% or less. On the other hand, Apple pays an annual dividend of $12.20, which is higher than the interest payments per share would be (as long as the shares cost less than $610 each).

Long story short: Icahn is suggesting Apple take advantage of low interest rates and an undervalued share price to increase the value of the company and reduce net cash outflows. Of course Icahn would benefit from this, as would every other Apple investor.

 

[Wuiffi]

I request a new maxed out rMBP for free right now!

You can't allways get what you want....

 

[gnasher729]

1) Apple's duty is to its shareholders. The company is not run for the benefit of its managers and they do not own the majority of the company.

But the CEO runs the company, with overview by the board of directors, and their job is actually to look after the company and make sure that it does what it was set up to do. Shareholders are not legally owners, or they would be responsible to pay for debts of bankrupt companies as well.

And there is most definitely nothing that says Apple has any duty to increase the short term share price. Especially when there are long term investors who might see their share price in five years time suffering from bad decisions made today.

 

[Ramchi]

Don Carleone

Hope this guy is not a Don having a meeting with Tim and making him an offer he can't refuse....bulll***** .....these guys still exist

 

[FirstNTenderbit]

The list of companies destroyed by Icahn for his personal enrichment is long and storied (TWA for example). More appropriate would be for Apple to buy back his shares and forever ban him from owning any Apple products.

I wasn't even going to comment on this MR post. I am not market savvy so my thoughts would come across fairly naively. But I must say, out of all the comments I read thus far, yours is the funniest I've read on MR... ever.

Ban him from owning Apple products? You should have put one of these: or one of these: Heck, even one of these would work:

Your comment made my day.

 

[tennisproha]

Icahn is self-dealing, but he is almost saying what I have been saying for the past year or more. Apple should go private.

Icahn simply wants it to go partially private so he can benefit from his non-private portion.

Going private would retain the top 20 or so shareholders and they would stop being annoyed by the public markets and related noise entirely.

Rocketman

But what would that mean to the economy as a whole? All of Apples competitors are public. Would it put Apple at odds…

 

[mbh]

You just called iCahn a tail and Apple a dog.

I agree with one of these, but not the other

Good point. How about the lugnut trying to steer the Ferrari?

 

[mrhick01]

A strongarm attempt at a pump-and-dump.

 

[jdguggs10]

The problem is that you cannot predict income and cash-flow of consumer product companies like Apple too far into the future. There is too much uncertainty as other companies in this sector have shown in the past. That is why AAPL trade seemingly undervalued right now. It makes sense to keep a balance sheet that is not too lean when you are operating in this environment. Now, Apple certainly has more cash on hand than needed. But to throw it all out while being in a major product transition (iOS7) would be very unwise. Apple has different shareholders. Some of them are looking for long-term returns. If all investors were like Icahn a company like Apple could never have been built because short-term targets are a killer to all long-term strategies.

Yeah. I don't agree that his proposed $150 billion buyback does anything to the long term viability of Apple.

 

[jw2002]

Using last year's numbers, Apple pulls in $2.5 billion of revenue in a little under a week. They won't care a discredited financier with a track record of destroying and self-cannibalizing companies has to say. And especially when said financier's holdings are little more than a drop in the bucket of the company's overall value or earnings power.

My suggestion to Tim Cook is what Khan Noonien Singh would say: "Let them eat static."

 

[jdguggs10]

I know this will likely get down voted, but let me explain something. Icahn is not suggesting Apple use all its cash to buy back the stock; he is suggesting Apple borrow the money to do so. Because of its financial strength and because the government is suppressing interest rates, Icahn believes Apple could borrow $150 billion at 3% (based on their recent bond sales, they would likely pay less). Interest payments are tax deductible so Apple's effective interest would be 2% or less. On the other hand, Apple pays an annual dividend of $12.20, which is higher than the interest payments per share would be (as long as the shares cost less than $610 each).

Long story short: Icahn is suggesting Apple take advantage of low interest rates and an undervalued share price to increase the value of the company and reduce net cash outflows. Of course Icahn would benefit from this, as would every other Apple investor.

Bravo.

 

[MacLC]

This makes Gordon Gecko look like a back seat investor.

I've worked as an assistant to a huge investment banker in the past. I can honestly say that a lot of investors are actually honest people. That said, this looks like the greatest pump and dump scheme ever conceived of. A man invests into 1-2% of a company, then demands the company use 100% of its cash to buy back 20-30% of its shares. What would Icahn (or any of us in his position) do in that situation? After gutting this company of cash would we not sell out before times get tough?

Share buyback can work to increase value for investors, but I would be happier with non-Chinese manufacturing and more money spent on innovation or perhaps risking money on iPhone Mini/Nano/Shuffle type devices.

Share buybacks are what good companies do when there are no better alternatives for the money. Heck, Apple could invest in solar cell manufacturing or Pacific Ocean recycling ( http://en.wikipedia.org/wiki/Great_Pacific_garbage_patch ) or environmentally friendly REE acquisition. There are so many more useful things Apple could do with the money than listen to a smooth-tongued trader.

 

[Mums]

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.

The banksters have taken over Apple. You can tell by the behavior of the company since Jobs died. Art Levinson and Peter Oppenheimer were plants from the start - kinda like Al Gore - except with real power.

 

[jdechko]

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.

Pretty much sums up my thoughts. Concentrate the ownership by repurchasing shares and the value of each individual share goes up, including Icahn's (who just said he didn't want to sell).

 

[MacLC]

I know this will likely get down voted, but let me explain something. Icahn is not suggesting Apple use all its cash to buy back the stock; he is suggesting Apple borrow the money to do so. Because of its financial strength and because the government is suppressing interest rates, Icahn believes Apple could borrow $150 billion at 3% (based on their recent bond sales, they would likely pay less). Interest payments are tax deductible so Apple's effective interest would be 2% or less. On the other hand, Apple pays an annual dividend of $12.20, which is higher than the interest payments per share would be (as long as the shares cost less than $610 each).

Long story short: Icahn is suggesting Apple take advantage of low interest rates and an undervalued share price to increase the value of the company and reduce net cash outflows. Of course Icahn would benefit from this, as would every other Apple investor.

That is all the rage now. Intel and Microsoft are doing that as is Apple. The problem is that you are borrowing in USD. You have to pay it back in USD. Apple gets roughly 1/2 its sales and less than 1/2 its profit in USD. When Apple has to pay back that loan, Apple will have to either A) stop the buyback (kind of like ending QE, it would negatively affect share price) or B) repatriate billions in cash and be taxed a second time on that (which would have a terrible effect on Apple's balance sheet). Either way, that suggestion is a short-term solution with terrible long-term consequences. Great if you are into short-term trading looking to make a quick buck. Not so great if you are a long-term investor.

 

[IJ Reilly]

I know this will likely get down voted, but let me explain something. Icahn is not suggesting Apple use all its cash to buy back the stock; he is suggesting Apple borrow the money to do so. Because of its financial strength and because the government is suppressing interest rates, Icahn believes Apple could borrow $150 billion at 3% (based on their recent bond sales, they would likely pay less). Interest payments are tax deductible so Apple's effective interest would be 2% or less. On the other hand, Apple pays an annual dividend of $12.20, which is higher than the interest payments per share would be (as long as the shares cost less than $610 each).

Long story short: Icahn is suggesting Apple take advantage of low interest rates and an undervalued share price to increase the value of the company and reduce net cash outflows. Of course Icahn would benefit from this, as would every other Apple investor.

Fortunately this board no longer allows down votes, or you'd probably get plenty of them -- not for being wrong, but for being right. The way it goes.

Essentially, Icahn is simply urging that Apple do what it has already done, but more so. Not a very radical suggestion. The other part of Icahn's message is that he believes that AAPL deserves a higher multiple even if earnings growth remains relatively modest. Of the people who comprehend what this means, I wonder if any believe saying so constitutes a "manipulation" of the stock?

So for whatever anyone might think of Carl Icahn, at least he puts his money where his mouth is. That's a lot more than we can say about some.