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Carl Icahn Pushed for $150 Billion Stock Buyback at Dinner with Apple CEO Tim Cook [Update: Has $2 Billion Invested]
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Apologies I was too personal you're right. Sorry.
I am active investor on the markets and have been so for a while so I understand perfectly how things work. Sustainable organic growth or growth through sensible acquisitions is far better than a quick hit IMO.
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It's the truth. Apple went public in the 1980s. You think they are still using that cash to fund their business? Cash from iPhone sales are funding their business not cash from investors or shareholders. If everyone sold their shares today Apple would still go on without even noticing it.
No he doesn't leave "the rest of us wondering", but the Wallstreet cheerleaders here DO.....
Is that you Carl?
There are always other ways to spend cash. What will best increase shareholder value is always a matter of debate. I believe one of the arguments used for Apple to finally issue a dividend is that it would open up mutual funds that will not invest in a stock that does not issue dividends. That's a small example but one that will increase demand for a stock and therefore should increase value to shareholders.
OK, but you clearly don't understand how capital markets work. I'm sure your education didn't cover this, as you just demonstrate a lack of grasp of the basics, as well as the ability to express yourself clearly in this domain. Grab a book on financial theory. I can see now you are not a lost cause!
I am willing to believe that you are knowledgable and educated in unrelated areas.First, all the people/institutions who bought the stock above 500 are in the red. Are all of those people greedy speculators? Are they not entitled to at least re-coup their investment in some manner considering how well Apple is doing? Secondly, if they are utilizing only their profits as you claim then why not buy back shares if they have a mountain of cash to do so? As soon as Apple went public their primary responsibility was to maximize shareholder value and returns. If they don't want to do that, than continue to do buybacks and finance a privatization effort. Also, if shareholders saw Apple utilizing the funds for growth opportunities then I'm sure there would be less of an outcry.
OK, that's a reasonable question, so let me respectfully answer it. Apple is sitting on cash precisely because they can't identify enough good investments with which to use it. It's a tautology. Sure, Apple could be buying some random company, for example, but if it's not synergistic, then Apple is just going to be worse off by the distraction, and lose money. If you read Job's bio, you know Steve was obsessed with focus-- and he was right. By returning some of the money to the stockholders, the stockholders can go off, and say, invest that money in an electric car company, run by people who know something about electric cars-- and make themselves richer and the world a better place (we would hope
A buyback is, of course, only going to have a one time impact on the share price. It's up to the company to find avenues for growth that will have a longer term impact. But one can assume that Apple management has already made every effort to fund productive future investments BEFORE they chose the buyback route.
You're suggesting that there are no investment opportunities out there? I don't think so. It's just Apple's management has been too cautious in taking a few risks. Sure Steve didn't want to do that. But Steve also didn't want to pay dividends and would never have agreed to a share buyback.
I just don't believe that there aren't opportunities out there for Apple to invest or acquire that would have a direct impact on their bottom line.
And I would argue that Apple is already engaged in "sustainable organic growth" and "growth through sensible acquisitions" and still has a mountain of cash left over.
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They still have a responsibility to that initial investment, no matter how many times it's been bought or sold or how much that initial investment was worth.
I was mainly referring to (for example) those demands that were made that Steve Jobs' state of health as CEO has to be made public, Apple constant duty to defend themself for the product cycle strategy, their forecast for the next quarter etc., but you're probably correct and I didn't thought this through - probably would be a similar situation, only that Apple would have to give account to OTHER people.
I actually don't have that much of an issue with the dividend - it's big for a tech sector dividend, but still a relative drop for Apple's cashflow and really merely a token.
I agree that there are always other ways to spend cash that may or may not increase shareholder value. Problem right now is that Apple seems to be doing very little in the way of anything with their money, at all.
Let's assume, for a moment, that Apple is currently optimally allocating the appropriate funds (give or take several billion) towards capex. That is anything that is worth buying or investing into they are already doing so (or is in the process).
What should they do with their growing cash reserves?
Sitting on it minimizes longer term risk (allows you secure your future). Buying back minimizes your shorter term risk (you can borrow money at, say, 1.5%, while you are paying out dividends at 2.5%).
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OK, but you clearly don't understand how capital markets work. I'm sure your education didn't cover this, as you just demonstrate a lack of grasp of the basics, as well as the ability to express yourself clearly in this domain. Grab a book on financial theory. I can see now you are not a lost cause!
My degree in business and economics did help but I've been an active investor for many years so I understand fully how these things work. I want Apple to grow gradually over time and the share price to gradually appreciate with it. That is more sustainable that a quick hit. It's not rocket science my friend. Ask Warren Buffet, he's been doing exactly this for many years and I think he knows more about it that you or me.
This is incorrect and a very common misconception on these boards.
Shares of a public company is traded on the public stock market. Shares of a private company is not on the public stock market but can still be "traded" (bought and sold). At the end there's at least one person owning the company. Apple can't own itself.
You pay your money you take your chance. Buying shares is a risk. They can go down as well as up. They should not have invested if they didn't understand that.
FYI, Apple did ask Warren Buffet and he advised to buy back their stock. (I believe it was a several years ago though)
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LOL..you blame them for taking a risk when investing in a company and then criticize them for having the gall to ask the company to give them more of a share in the profits.
The business case is fulfillment of basic duty to shareholders to make shareholders money. It isn't a business case, it is actually the goal of the company's existence. Business cases are designed to achieve this goal. Literally shareholders get cash as they sell stock back to Apple. Shareholders who don't sell (your most loyal shareholders?) get right to correspondingly greater percentage of company.
Downside is Apple reserves less ready capital to do a massive acquisition or expansion. But this isn't viewed as a downside because Apple hasn't ever done acquisitions in the $100B range and shareholders probably don't want management to start doing things like that. (Talk about distracting, imagine Apple trying to acquire Sony and integrating the two companies together.)
Verizon just did a $49 billion bond issuance. Apple could easily do something of the same scale at a very attractive rate. So they might do that for the same reason they did the $19 billion facility. I think that is what you were suggesting and I agree with you that if they were going to upside these buybacks, Apple would finance some of them. I suspect for largely illogical and psychological reasons, Apple's Board and Management are going to start to feel that having $100B or more in pure cash is a prudent thing to have "just in case". This despite the fact that no other public company in history has ever kept that kind of cash on hand. Having less than that will make them nervous even with the piles of cash that come in through the door every day.
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No they don't. If you kept your shares from the beginning you would have made a healthy return. If you sold them on then that's the end of their responsibility to you.
This is legitimately hilarious. What I said regarding the Dell deal isn't controversial - it was a statement of fact. Michael Dell and Silverlake submitted a bid to take Dell private. This entails buying the stock from the common shareholders. Icahn felt that the deal was deficient and fought the Board to hold out for more money. He succeeded and Dell and Silverlake subsequently raised their bid which all the common shareholders (the owners of the company) benefited from.
You simply don't know what you're talking about. You are not familiar with how the market works and you show absolutely no initiative in learning more - you're simply parroting whatever narrative fits with your naive world view. Everyone is entitled to their own opinion - no one is entitled to their own set of facts.
I'm not blaming anyone. They bought in at 500 and the share price went down. It's tough luck but that's life. Investing in the stockmarket is a gamble. Apple has already upped it's dividend which is a better way of returning cash to investors. If they grow the company the shares will go back up over time anyway.
Yep. To go private, someone has to be the owner to take out the shareholders. Apple's management, despite being millionaires, aren't multi-billionaires. A privatization attempt would be by someone far richer. I suspect that Cook prefers reporting to the public markets quarterly and to a weak board (plus the occasional dinner with a shareholder like Icahn) then to answer to a private equity shop or a Russian Oligarch or a Saudi Prince.
You will find a lot of people who disagree with your assertion that dividends are better than buybacks for returning cash due to the tax treatment of dividend income vs. capital gains.
But you are calling them greedy speculators because they don't feel that the dividend and current stock buybacks are sufficient. If you are a long time investor and believe in the company why would you complain about them doing stock buybacks at this point? They are not doing anything else with that mountain of cash. They can ramp up value for long term shareholders if you believe Apple is undervalued.