“I had to see it to believe it, but it looks as though Carl Icahn, one of the world’s most respected investors, is actually going through with pushing Apple into a $150B buyback program,” Ashraf Eassa writes for Seeking Alpha.
“While the excess cash on Apple’s balance sheet is likely excessive (and negatively impacts return on equity), such a large buyback – particularly if Apple heavily levers up to do it – is not likely to end well for the long term shareholders of Apple,” Eassa writes. “While a gigantic $150B buyback would certainly create near-term buying pressure, it does nothing from a longer term viewpoint. If Apple’s business improves, then the share price will trend upwards, and if the business gets worse, then the share price will ultimately collapse – with, or without, a buyback.”
Eassa writes, “The push for a buyback seems to me an attempt on Carl Icahn’s part to drive upside to the shares in a fairly short timeframe… Such a buyback is great for short term trader/speculators, but for long term investors, not so much. Is Apple’s cash hoard huge? Yes. But who knows what the company could use it for? While buying back Apple stock is not the worst way to spend that cash, making sure that the company has enough dry powder in order to do what’s necessary to fund the next leg of growth is more important.”
Read more in the full article here.
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