Recent performance of Apple stock makes case for companies staying private

“Sure, public markets may be efficient on average. However, this should not allay the very real fears of specific companies. Ninety-five percent of a classroom might be getting the grades they deserve, but that’s little comfort to the two students whom the teacher fails because he doesn’t like them,” Brian Hamilton writes for ABC News. “The performance of Apple and Netflix over the last several years demonstrates that specific companies should be cautious about going public. Let’s look at the numbers.”

“Apple is the most profitable technology company in the world, and trails only two banks in China and a handful of energy or oil companies on Fortune’s Global 500 list of most profitable companies,” Hamilton writes. “With a whopping net profit margin of nearly 24 percent and an almost incredible yearly sales growth rate of 19 percent, the stock price has plummeted by nearly one third since April 16, 2012. Shares that were $580 a year ago are now $406[1]. Based upon true economic performance, does this make any sense?”

Hamilton writes, “Given the uncertainty of short-run pricing, can it be a surprise that the number of public companies has dwindled from more than 8,000 to 4,916 since 1997? … Most business owners who start their own companies do so because they’re convinced they can do it better – build a better product, offer a better service, operate a company more efficiently – than the competition. They expect strong performance to be rewarded and weak performance to be punished in an equitable way. The prospect of seeing their company’s net worth or shareholder value go down as Apple’s has gone would be unsettling for management, employees, lenders and other business partners. Who needs that kind of uncertainty?”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

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Apple’s all-time record earnings drag down NASDAQ futures – January 24, 2013
Gundlach: Apple ‘a broken company’ – January 24, 2013
Apple’s all-time record quarterly earnings disappoint – January 23, 2013
Jim Cramer: ‘Without Steve Jobs, Apple is just another stock, it’s not magical anymore’ – January 23, 2013
After posting new all-time record revenue, Apple shares collapse in after-hours trading – January 23, 2013
MacDailyNews presents live notes from Apple’s Q113 Conference Call – January 23, 2013
Apple reports record results: $54.5 billion revenue, $13.1 billion profit, $13.81 EPS – January 23, 2013

17 Comments

  1. Who would have thought that Mikey Dell was (partially) right? Apple should shut down and give the money to the shareholders, almost 45% drop in AAPL speaks for itself…DCW

      1. Now, Apple is a big, fat, easy target, guaranteed to raise page hit counts. Then, not so much. Opportunists, whores, and assassins are not students of history.

  2. From the most-excellent article:

    Out of the 27 million businesses in America, nearly all are already privately held, and they drive the lion’s share of economic growth and jobs.

    Most business owners …. expect strong performance to be rewarded and weak performance to be punished in an equitable way.

    YES. Therefore, Wall Street is indeed losing out on companies that have zero interest in being screwed over by Wall Street’s current, blatant manipulation of stock prices for the sake of parasitizing suckers. This evil bullshit has nothing to do with business. It has everything to do with biznizz bozoids abusing the honorable system known as ‘capitalism’ and ruining its reputation. A pox upon them.

    1. Well said, DC.

      Rather than Apple appeasing the street, analysts, media, et al — they should at the very least consider spending billions in cash in favor of going private to end the manipulative madness.

      1. A big chunk of their spending is going towards reducing the number of outstanding shares. I’m not sure if they have seriously discussed the possibility of going private but I’m sure it has crossed their minds into weaker of this unjustified manipulated madness.

      2. Apple can’t just decide to go private. Going private means being owned by private investors as opposed to selling publicly owned shares of the company. Currently Apple is owned by thousands (tens of thousands? Hundreds?) of individual investors, mutual funds, pension funds, etc. For Apple to go private some group has to come up with the money to buy all of those shares from those owners. This makes it really unlikely that Apple will go private. Although the current price of a share is around $400, in order to induce more than half the owners to sell the price would likely go much, much higher. Let’s guess $1,000. There are about 939 million shares of AAPL so a purchaser would need almost a trillion dollars, including whatever fees Goldman would charge. I suppose you could try to assemble a large coalition of zillionaires to do this, but now you have the problem of too many bosses. And who wants to risk a trillion dollars on a buyout like this? Suppose you did borrow a trillion dollars and bought Apple. What if the employees didn’t like you and Ives and most of the others quit? Now what would you do? How would you pay back the loan?

        There are some other games that are played in the case of smaller companies, but there is no way that the shareholders would vote for anything silly.

    2. My understanding of stock markets is that they permit making money from speculation on actual business outcomes. How is that different from the Las Vegas bookmakers who advertise odds on the outcomes of sporting events?

      1. The difference? In sporting events, the athletes must collude (in most cases) to manipulate the outcome. Wall St found a way around that pesky requirement for the principals to sacrifice their principles for Wall St to increase their principal…

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