Carl Icahn Presses for Apple Shareholder Vote on Increased Stock Buyback

[meecect]

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

I don't see how that is much different than what I said. When i say a 'piece of paper', I don't mean that it's worthless. But it is just trading paper. It's not giving money to Apple. You could of course sell that paper and make a profit, and Icahn could do that, if he wanted, because it is very valuable paper right now. He just wants apple to essentially destroy a bunch of the outstanding paper first so that his paper is worth more when he dumps it.

I realize that it gives you you a tiny fraction of ownership, but I admitted as much in my initial post. It gives you a vote, it's a just a very small one. Technically it is a claim on future assets, but again, it is a vanishing small value.

The only value is in its possible appreciation. I get it that shareholders are arguing for moves that cause this appreciation, I'm just saying that what they argue for and what is in the best interest of the company are not the same thing, for late investors like this, and especially for a financial move like this.

Makes sense from an investor's standpoint, but not much from the companies standpoint.

 

[teknikal90]

I realize that it gives you you a tiny fraction of ownership, but I admitted as much in my initial post. It gives you a vote, it's a just a very small one. Technically it is a claim on future assets, but again, it is a vanishing small value.

$560 today. not really a vanishing small value, even for one share.
anyway, I'll Pm you the rest of what I'm saying so as to not disrupt the conversation here

 

[mrxak]

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.

That third choice will never be an option. The prices they're selling their products at are the prices people are willing to pay. The fact that Apple can innovate to sell better products or sell products more efficiently than other companies is no reason to lower their prices unnecessarily. They are a company, and their purpose is to make money.

The first choice is a good option ordinarily, but Apple's already doing that as much as they can. The cash keeps piling up faster and faster. That's not to say Apple can't and won't add new product categories, but these things take a certain amount of time. If Apple's profits are exceeding their ability to grow, the only option is the second one, returning money to the investors. They can do it through buybacks, and they can do it with dividends. How much and when are the two big questions now.

 

[Michael Goff]

But, but... he's ugly and his mother dresses him funny!

He is, but that's not even my biggest problem with him. He just... never seems happy. It's always "another buyback... AND FASTER THIS TIME". Calm down, dude, enjoy your billions.

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

Alright, since you apparently know your stuff, I'll ask you a few questions regarding the actual proposal.

A) How much money is "the right amount" until they have paid back enough to the shareholder? Remember that they need to have some money to be flexible enough to make the huge orders for lower prices, maybe gobble up a company to help out their offerings, or even expand out and eventually maybe make their own supplies. These are all things they would need a decent amount of money to invest in.
B) Somebody said, earlier, that greater confidence from shareholders would help out the average consumer. I might have missed out on how, but maybe you could explain it. Why should the average consumer care about a stock price or shareholder confidence?
C) Going back to the first question, how are we sure that Carl won't keep asking for more and more "buybacks" until Apple isn't in a position to do the things it needs to do? It might seem like a laughable idea now, but he seems to just keep up the demand for more and more.
D) How does a larger buyback help with the long term health of the company?
E) How do investors help Apple at this point? Surely they don't need the money, they make billions in profit.

I think that should be enough for now, sorry if it jumps around.

 

[IJ Reilly]

Another point of order: Common stock shareholders don't have any direct claims to a company's assets. What they own is equity, which you will discover is quite a bit different than assets if you ever hold shares in a bankrupt company. The company's assets (property, cash if any) goes towards paying off the company's debtors, of which stockholders are not one. Holders of bonds might get something out of liquidated assets, but stockholders almost never do, as the equity in the company was effectively wiped out by the bankruptcy.

A seemingly small but still very considerable distinction, especially if we are going to talk about shareholders "owning" a company. This is true only in theory. A stockholder only gets access to a company's assets if it (1) pays a dividend, or (2) they buy the entire company.

 

[meecect]

$560 today. not really a vanishing small value, even for one share.
anyway, I'll Pm you the rest of what I'm saying so as to not disrupt the conversation here

I think you are misreading me. I'm not saying that $560 is a vanishing small value, I'm saying that the other rights a single share (or a thousand, for that matter) gives you is vanishingly small. It's just a pricey piece of paper. I'm not saying you can't trade it and make even more money. Obviously you can. That piece of paper is worth whatever the next guy wants to pay for it. In fact, the high face value of a current Apple share is the point I'm making. By far the greatest value in Apple stock today is the the high share price and it's chance at getting higher still.

People aren't buying Apple stock because they get a vote. They are buying it because they paid 560 for it and hope to sell it for 1000. They are buying it for appreciation. They aren't buying it because it will allow Apple to build a new factory or higher more designers. They are speculating. So I get why they want it to go up. I also get why Apple wouldn't want to reward their speculation, as it does nothing to enhance the operations of the company. It's throwing money away.


You seem to be really getting hung up on the fact that I keep using the term 'paper', which is odd, because a stock certificate is in fact paper. It has a perceived value set by the market, but it is still paper. Buying and selling it on the exchanges is just trading paper back and forth amongst speculators. Some people winning, some losing. As long as the market keeps gaining more investors or existing investors keep putting in more money, the valuation wil increase, but it's just a speculative market.

 

[Michael Goff]

Another point of order: Common stock shareholders don't have any direct claims to a company's assets. What they own is equity, which you will discover is quite a bit different than assets if you ever hold shares in a bankrupt company. The company's assets (property, cash if any) goes towards paying off the company's debtors, of which stockholders are not one. Holders of bonds might get something out of liquidated assets, but stockholders almost never do, as the equity in the company was effectively wiped out by the bankruptcy.

A seemingly small but still very considerable distinction, especially if we are going to talk about shareholders "owning" a company. This is true only in theory. A stockholder only gets access to a company's assets if it (1) pays a dividend, or (2) they buy the entire company.

Okay, I'm obviously not as savvy as some others. So break it down: Does Apple "owe" people something or does it not? Because, well, that's an important thing to know.

 

[mrxak]

And if they buy more and more quickly, then Carl will keep asking for more. He's never going to be happy.

Well which is it? You've got people on one side saying Icahn will haunt Apple forever, and people on the other side saying he's going to dump his stock at the earliest opportunity plunging Apple into chaos and destruction.

Niether scenario is true, by the way, if you understand the stock market one bit.

At best, every shareholder will see his or her share of the company become more valuable, and Icahn will cash out leaving the shareholders with more valuable shares. Worst case scenario, Icahn loses money and shareholders lose value as well. Every shareholder is in this for the same outcome, just with different proportions of that outcome. Apple won't crash and burn no matter what Icahn does, and if Icahn is looking out for his own best interests, that will be the same best interests of every other shareholder.

 

[pedrotaquelim]

Apple will fall if it listens to much to this guy.

 

[Michael Goff]

Well which is it? You've got people on one side saying Icahn will haunt Apple forever, and people on the other side saying he's going to dump his stock at the earliest opportunity plunging Apple into chaos and destruction.

Niether scenario is true, by the way, if you understand the stock market one bit.

At best, every shareholder will see his or her share of the company become more valuable, and Icahn will cash out leaving the shareholders with more valuable shares. Worst case scenario, Icahn loses money and shareholders lose value as well. Every shareholder is in this for the same outcome, just with different proportions of that outcome. Apple won't crash and burn no matter what Icahn does, and if Icahn is looking out for his own best interests, that will be the same best interests of every other shareholder.

Couldn't it be both? Couldn't he keep buying some stock, then couldn't he keep ordering them to keep dumping money? Or maybe he just dumps a large portion of his stock?

 

[macs4nw]

Ahh, just when I thought he'd gone away...

No such luck. Despite the face of a lamb, Carl has the tenacity of a pitbull.

 

[IJ Reilly]

He is, but that's not even my biggest problem with him. He just... never seems happy. It's always "another buyback... AND FASTER THIS TIME". Calm down, dude, enjoy your billions.

I don't take any interest in his personal life, or in telling him how to live. He invests at a scale that most of us can hardly even imagine, but so long as he's investing in companies I hold and saying things I agree with, and that make my investment more valuable, then I am perfectly fine with him.

 

[mrxak]

Okay, I'm obviously not as savvy as some others. So break it down: Does Apple "owe" people something or does it not? Because, well, that's an important thing to know.

They don't owe money to shareholders in the way that you owe money to the bank that gave you a loan. Investments are inherently a risk. But it is understood by all involved parties that the only reason a shareholder has bought a share (regardless of who they bought it from) is expecting a return on that investment. Seeing as how shareholders can boot the board if they're not happy, companies are very much interested in giving the shareholders a return on their investment.

----------

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%.

And guess what? He can't.

 

[meecect]

They don't owe money to shareholders in the way that you owe money to the bank that gave you a loan. Investments are inherently a risk. But it is understood by all involved parties that the only reason a shareholder has bought a share (regardless of who they bought it from) is expecting a return on that investment. Seeing as how shareholders can boot the board if they're not happy, companies are very much interested in giving the shareholders a return on their investment.

I agree that is the common view, however I will note that many of the companies that run their operations that way, to appease shareholders, or to 'maximize shareholder return', fail, and the few companies, like Apple, that realize they don't owe shareholders (outside their initial investors) squat, do extraordinarily well.

And ironically, not giving a flip about what speculators think has worked out pretty well for the speculators too. Go figure.

We need more companies like Apple, frankly.

 

[Michael Goff]

They don't owe money to shareholders in the way that you owe money to the bank that gave you a loan. Investments are inherently a risk. But it is understood by all involved parties that the only reason a shareholder has bought a share (regardless of who they bought it from) is expecting a return on that investment. Seeing as how shareholders can boot the board if they're not happy, companies are very much interested in giving the shareholders a return on their investment.

----------



And guess what? He can't.

Seriously, from the bottom of my heart, thank you. That one paragraph made me understand more than 7 pages of arguing.

 

[mrxak]

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.

Ah, so you have a problem with corporations as a whole, then. The only reason companies can have IPOs and raise cash to grow to begin with is because down the line, they're promising returns.

 

[IJ Reilly]

Okay, I'm obviously not as savvy as some others. So break it down: Does Apple "owe" people something or does it not? Because, well, that's an important thing to know.

I'm not sure that's the right question. Stockholders have a voice in how a company is run, but it tends to be a distant and often muted voice. Just the same, stockholders want to know that companies where their money is invested are run well. Accumulating more and more cash is often taken as a sign that something could be handled better, especially when it goes on for years on end. Either the company is underinvesting in future growth, or something else. At some point, the board "owes" their stockholders some sort of explanation, or questions about the soundness of the management strategy are going to be raised. So in a sense, what Apple "owes" its investors, at the end of the day, is the best corporate management and governance possible, because this makes for maximized profit growth.

Hope that makes some sense.

 

[mrxak]

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.

While absolutely correct on all counts, you should think of it as an opportunity to educate, rather than berate.

 

[meecect]

Ah, so you have a problem with corporations as a whole, then. The only reason companies can have IPOs and raise cash to grow to begin with is because down the line, they're promising returns.

Not sure where you got that I hate corporations. I have no problems with corporations. In fact, I'm arguing on Apple's side and pointing out that sometimes what an investor wants ( a solid return on a speculative purchase) is not always what the corporation should do to continue its success.

The shares are over 500 bucks, right? Seems like there were plenty of returns, for many years now, among many, many buyers.

I'm not sure what level Icahn got it in at, but he likely could sell and make a decent return, right? Nothing wrong with that. Good on ya, Carl.

Look, I get it, investors want to make more money, faster. Nothing wrong with them advocating for that. Just recognize that that is what Icahn is doing, arguing for his personal enrichment (and other shareholders). Why it makes sense for Apple is another story.

 

[mrxak]

Seems like a blatant and obvious manipulation of the stock market - thought that was illegal, perhaps only for we ordinary folk?

No shareholder, regardless of size or wealth will ever be prosecuted for exercising his rights as a shareholder and telling the board what he thinks they should be doing.

If you think that's illegal, you must think the entire stock market is illegal.

 

[Michael Goff]

I'm not sure that's the right question. Stockholders have a voice in how a company is run, but it tends to be a distant and often muted voice. Just the same, stockholders want to know that companies where their money is invested are run well. Accumulating more and more cash is often taken as a sign that something could be handled better, especially when it goes on for years on end. Either the company is underinvesting in future growth, or something else. At some point, the board "owes" their stockholders some sort of explanation, or questions about the soundness of the management strategy are going to be raised. So in a sense, what Apple "owes" its investors, at the end of the day, is the best corporate management and governance possible, because this makes for maximized profit growth.

Hope that makes some sense.

Makes perfect sense. I had thought that, but then somebody had come back with the retort of "but they own the company". It kind of confused me.

 

[osaga]

I sorta like Carl Ichan. He's an activist investor, and if you listen to him talk he seems very transparent about it. He's not doing thing illegal. He just shovels his huge pile of money around at different companies whenever he sees an opportunity. Then he uses whatever shareholder bylaws he can to force an issue or a vote, gain some publicity, (the man's 77 and uses twitter for god's sake) get some momentum up and then taper down his holding. If Apple said they were doing a 150 billion dollar buyback, he'd tell the press it should be 300. Hate the game not the player.

 

[9000]

On one hand, this guy knows what he's doing. "In October of 2013 Ichan sold about 4% of his shares in Netflix for a profit in excess of 800 million in less than one year. This is believed to be one of the largest stock gains in history."

On the other hand, what if he just wants to pump and dump? I'm skeptical that this big of a buyback is worth it for Apple.

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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.

The idea is that it's supposed to spur long-term stock growth by boosting investor confidence in a time when it's low. But I don't see the merit of such a huge buyback (not a pro here, so maybe I'm missing something).

 

[SeattleMoose]

Is Apple injured? Sharks seem to be circling….

IJ Reilly….is that you Carl?

 

[9000]

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.

OK, so a shareholder is anyone who owns stock. Anyone who owns stock has a say in what the company does. Those with lots of it get a big say.