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Carl Icahn Presses for Apple Shareholder Vote on Increased Stock Buyback
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If Icahn's proposal was radical then I'd be concerned that Apple would sacrifice some strategic advantage, but it seems to me he's proposing little more than drawing a temporary line at $150b. Even if they went along with Icahn totally, then they essentially use one year's worth of free cash to buy back shares, and after that, it's off to the races again.
Incidentally, the source article quotes an Apple spokesperson saying that future plans will be announced around the beginning of next year. So the game is afoot.
LOL! Limp away with $100,000,000,000 in debt? Hardly. First of all, Apple will have no problem paying off that debt quickly, if they so choose to incur it. Apple is a very successful company with high earnings, and interest rates are incredibly low right now. The reason they'd take on the debt is for tax planning purposes. It's cheaper in the long run for Apple to borrow than it is to bring in their overseas money.
Regardless of what you think of Icahn, he's saying nothing that a lot of shareholders aren't already thinking, including those who are long-term investors. Apple is losing money on their cash hoard, they're gaining profit faster than they could ever possibly spend it, and it's a drag on shareholder value. If Icahn dumps his shares three months after a buyback, it will not affect Apple one bit, he's a minor shareholder and Apple's shareholder value will remain higher than it is now after a buyback because of the fundamental economic realities of a buyback.
A buyback makes a lot of sense for a lot of reasons. It's just a matter of how much and when.
True, but the only reason you would need to borrow against your market cap like that is if you were cash poor, which Apple is not, and which Apple won't be as long as they ignore people like Icahn.
Also, you know what makes you hard to take over, more than your stock evaluation? Cold hard cash in the bank.
Stock is absolutely worthless to Apple. When they buy back stock, they are literally destroying it. Spending perhaps billions of dollars to appease some guy who bought a bunch a paper from some other guy, who, a thousand transactions ago bought from some other guy who gave you the money to build your company (who has already been handsomely rewarded) seems like a stupid way to run a company.
Let's say I started a baseball team 40 years ago and made promotional baseball cards that I sold to friends so that I could buy uniforms. These friends helped me with some of the initial decisions about our team. They were a penny a piece, so my short list of friends bought them by the hundreds to help me out.
My team went on to be a success. So much so that decades later, those cards are still out there, now fetching like a thousand dollars a piece as collectors items. Those first friend investors long ago sold their cards, some at little or no profit and some at a large profit. The cards have been sold and resold and resold again a thousand times over. My team had nothing to do with the transactions after the initial sale.
My team is an empire now, and we make our money selling tickets to our games and no longer have to beg friends to become card collectors to buy new uniforms. We're such a success that I have a pile of cash in the bank, which I might use to set up franchises or any number of things.
Then some guy comes along, decades afterwards and starts scouring ebay, spending thousands and thousands of dollars on these old baseball cards.
Now, sure, he could hold on to them for a month or a year and then sell them on ebay, just like everyone before him, and probably make a decent profit.
Instead, he comes to ME and says my team should buy them back for a thousand times what I got for them initially and then burn them.
Yeah, uh, not gonna happen.
In the stock market, the only way it happens is when a group of investors buys up enough shares that can push around the board and then force the company to do a buy back, and then they cash out and walk away with pockets full of cash. It's fricking looting, and I hope Tim Cook doesn't fall for it.
Then go buy government backed treasuries and/or bonds.
Your risk analysis is actually off regarding risk/reward on stock investments.
It's a buyer beware investment. You are owed nothing.
The outcome is the same for all shareholders. That's what it means to be a shareholder. There's nothing magical about Icahn's shares. If he gets Apple to do something in the interests of himself, it's in the interests of all shareholders, and all shareholders will reap the benefits.
The question here is not Icahn's motives, it's who's plan is best for all shareholders, including Icahn. Icahn may believe his plan is best for shareholders, but he could be wrong. If he's wrong and Apple goes along with it, he'll not make the sort of money he was hoping to make. If it turns out he's right, then he'll make the money he wants, and so will every other shareholder. It doesn't matter if he dumps early or not, the increased shareholder value will still be there for all shareholders. With less shares in the world, each share is worth a greater proportion of the earnings.
I really wish people who are completely ignorant about finance wouldn't opine on financial matters before actually reading up on the relevant issues.
I have the decency not to go onto digital camera forums and act like I know anything about photography/cameras so why is the same not expected when it concerns finance? The responses here, for the most part, are a complete embarrassment to this community.
Relevant Facts
-The purpose of an enterprise, at least a public one, is to make money
-Stocks are valueless unless profits eventually accrue to equity holders
-If a company hasn't used the money it has been making for a decade it might be wise to give it to the owners of the company
-If Apple's cash position has been growing while it has been engaging in R&D, buying companies, investing in the supply chain then it is, by definition, NOT using the money.
-A cash position this large is a risk and there is clearly a discount being attached to it
Overall, Apple is not a bank. When I buy a share of Apple I want to buy a technology company that is massively profitable. I do not want pay $565 for 75% of a technology company and 25% of...cash. That is ridiculous and I don't think shareholders who are against Icahn on this realize that fact. Their ROI is being harmed because Apple won't give the owners of the company a healthy return. Apple is not run for the benefit of management; it is run for the benefit of its shareholders. You are being duped on a grand scale and if your populist tendencies weren't coloring your views you'd be able to see it.
I have the decency not to go onto digital camera forums and act like I know anything about photography/cameras so why is the same not expected when it concerns finance? The responses here, for the most part, are a complete embarrassment to this community.
Relevant Facts
-The purpose of an enterprise, at least a public one, is to make money
-Stocks are valueless unless profits eventually accrue to equity holders
-If a company hasn't used the money it has been making for a decade it might be wise to give it to the owners of the company
-If Apple's cash position has been growing while it has been engaging in R&D, buying companies, investing in the supply chain then it is, by definition, NOT using the money.
-A cash position this large is a risk and there is clearly a discount being attached to it
Overall, Apple is not a bank. When I buy a share of Apple I want to buy a technology company that is massively profitable. I do not want pay $565 for 75% of a technology company and 25% of...cash. That is ridiculous and I don't think shareholders who are against Icahn on this realize that fact. Their ROI is being harmed because Apple won't give the owners of the company a healthy return. Apple is not run for the benefit of management; it is run for the benefit of its shareholders. You are being duped on a grand scale and if your populist tendencies weren't coloring your views you'd be able to see it.
I'm an Apple shareholder and I agree with Icahn.
It's one thing to be responsible with your money but another thing to just let it sit there in the bank account.
If I wanted to invest in a bank account, I would have.
If Apple has genuine plans for that money, let me know - be cryptic about it even, but let me know that it's for real use.
Apple may choose for me what I want for my computers, but it should'nt choose for me what I should be investing in.
Seems like a blatant and obvious manipulation of the stock market - thought that was illegal, perhaps only for we ordinary folk?
Yeah, apparently not paying your Taxes is the patriotic thing to do nowadays. This is the general problem with the "right." You can make serious arguments for wanting to pay no (or less) taxes, but then you have NO right to complain when the governments have no money to do their job. Governments are here because they can provide things that private companies can't. Especially for infrastructure. The U.S. infrastructure is literally crumbling and Americans are complaining about it but don't want to pay for it. Fine, then stop complaining. And if Apple thinks it's cool to not pay their fair share of US taxes, then they obviously don't really care about this country. Just think about all the things we wouldn't have if it weren't for government.
you sound like you dont know what youre talking about. why did you waste time posting that crap?
Wonderful retort, brilliant, it tells everything that needs to be told.
Next say 'no u', that's the continuation of your brilliance.
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I don't know anything about this.
Please tell us all more about this.
To be fair the poster he replied to is utterly wrong about nearly everything he claimed. It was a mess of a reply with too many fallacies to point out and correct.
I'll tell you what happened. Blockbuster's business was going to sh**, the CEO paid himself $50m and Carl Icahn fought for board representation and reprimanded him for doing it and pushed for the company to go private while it still had some value. They didn't do what Icahn said, and as Blockbuster was failing they wanted to buy Circuit City (another failing retailer) and Icahn successfully blocked that from happening since that would have hastened the failure of Blockbuster. He then bailed out since they repeatedly ignored him (much to the detriment of shareholders). Shall we also discuss the time Carl Icahn stood up for all the common shareholders of Dell and got them a far better deal than Michael Dell was offering them? What a horrible guy!
You may read it aloud if you must. I very well know what "shareholder" is supposed to mean. I also know what it means in the real world. D a bit of research beyond Wikipedia.
Which part? Buying a stock doesn't give that company money. It gives the investor on the other side of the transaction money.
If it were my company, enhancing the value of something you own would be the last of my objectives, unless I needed to borrow on that perceived wealth, which clearly Apple doesn't need to do. Making the best products and the most amount of money would be my objective.
When the IPO was done, the company was trading something. The investors were giving them cash, and the company was giving them a piece of paper that gave them certain rights. The rights were that they could resell the paper to another investor if they liked, and that if 51% of the paper holders wanted to call the shots, then they could. If you don't have 51% of the paper, then go pound sand.
Or sell your paper to someone else if you don't like it.
Increasing your 'ROI' on buying paper from some third party is pretty far down on the list of priorities, I would imagine.
Think of it from the perspective of the company. They sell a piece of paper to some guy for a small amount of money, and then that paper is resold and resold and resold thousands and thousands and thousands of times until some guy gets it, at a thousand percent markup from the original sale price and he demands the company start buying the paper back and burning it. No CEO in his right mind in Apple's position would do that.
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Well, pick one thing then.
for starters, dont think of shares as just a piece of paper. its a right over the value of current assets and any additional profits in the forseeable future
you wouldnt think money in your pocket is just a piece of paper do you?
anyway, macrumors is probably not the best place to discuss finance. ill move to other forums to voice my thoughts lol
No, no, your post had just as little value to it.
And how would going private have saved the company at all?
Anyway, he could have at least tried to point out (with facts) some of the things that were wrong. Otherwise, it just comes across as a pointless attempt to shut somebody down.
Corporations are shareholder-owned ventures, and when they're working correctly, they earn money for the owners. That's why people start corporations, after all, and why they invest in them, to make money. When a corporation first offers stock to the public (Initial Public Offering or IPO), it's a way of raising capital (money) so that the company can grow. They could remain private, using private investment and business revenue, but an IPO allows for raising a lot of cash very quickly for rapid growth. Thus you get companies like Apple who go from a bunch of people in a garage to the massive international business they are today. That sort of thing doesn't really happen without becoming a publicly traded company.
Now, those initial investors aren't giving a company money for nothing. They want a return on their investment from the company they've bought a share of. This comes through one of two ways. Either the company eventually buys back stock (a sort of reverse-public offering), or it engages in profit-sharing through a dividend, where the company pays shareholders a bit of money out of the company's coffers. The shareholder can also choose to sell their shares to somebody else at any time, giving up some or all of their ownership of the company. They hope to sell their shares for more than they bought them, but of course that's not always possible. When somebody sells, they're doing so because they don't think they'll get a better return on their investment than they have right now, or they think there's opportunity costs for keeping the stock, like there's another company that promises a better return and they can sell shares in one company to have the funds to buy shares in that other better company.
For a long while, Apple did not do buybacks or pay out dividends. It reinvested its profits into continuing to grow its business. If an investor wanted to get a return on their investment, they had to sell their shares to somebody else in the stock exchange. Lately though, Apple has been making so much profit, that it's coming in faster than they can grow the business. All that excess money is piling up, not doing anything at all for Apple's growth. Because Apple isn't using this money to grow, the shareholders are asking for a return on their investment, so they can use Apple's profits to invest in other companies that will get them a return with that capital. The money is wasted just sitting in the bank, so if Apple can't do anything with it, perhaps another company can.
Apple has started paying out dividends. These dividends are quite small, however, and Apple's cash is continuing to pile up. That's why the idea of a buyback is gaining traction. A buyback means that Apple would take back some of those shares it sold to the public long ago, paying investors a nice price, and thus giving those investors a return. Those investors who don't sell their shares to Apple will see their share of the company increase, because fewer shares will exist. Whatever Apple earns from that point on, the remaining shareholders will own a greater piece of those earnings. The price of the stock will start looking very cheap to other investors, accordingly, and thus demand for Apple stock will increase. Investors on the market will bid higher on Apple stock, and many investors in Apple will choose to sell their shares at a nice higher value than what they paid for them initially, thus get return on their investment.
So, having explained all that, it's really quite simple. If Apple buys back stock, the stock price will go up, and every shareholder will have the opportunity to get a better return on their initial investment. Icahn and some investors want a large buyback, Apple and some investors thinks a smaller buyback combined with dividends would be better. That's really the debate that's going on between the company and its owners. Everyone involved agrees that Apple has too much cash on hand. It's just a matter of how much to return to investors, how to do it, and when. Apple probably still has some growing to do, so it's a matter of figuring out what cash they still need to keep growing, then returning the rest in a way that doesn't harm the business or create excessive tax liability.
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i have a theory that anonymous posters on the internet are responsible for the majority of misinformation that goes around today.
the second major contributor i think are people who also have no idea but still choose to reaffirm the first guy for the sake of argument..
its not that I dont want to help, see my post above, but please, if you dont know what youre saying, ask a question, dont make an essay out of crap.
there are kids around
Not for the very first time. They paid a dividend (small) into the mid-1990s.
A minor point of order. Carry on.