“Billionaire activist investor Carl Icahn tweeted on Tuesday morning about his dinner with Apple’s CEO Tim Cook. Carl Icahn had continued to put pressure on Tim Cook for a $150 billion buyback of Apple’s (AAPL) shares,” Junius writes for Seeking Alpha. “Although the two did not come to any agreement, they have promised to continue their discussion in the next few weeks.”
“In a CNBC interview, Carl Icahn explains that a stock buyback for Apple was a ‘no-brainer’ and it ‘makes no sense’ not to do so, given that the company trades at such low multiples,” Junius writes. “Icahn explains that the current low interest rate environment means that it is a ‘golden opportunity’ to fund such a large scale buyback, and that this opportunity is not going to stay around forever.”
Junius writes, “While Carl Icahn’s call for greater return of capital to Apple’s shareholders is not new, continued pressure from reputable activist investors, including David Einhorn, should make the merits of greater shareholder redistributions clear to Apple’s management. The ability to obtain funding for a massive stock buyback at the currently low interest rates is not likely to stay around for much longer, and these conditions have been historically extremely rare. Apple’s currently low valuation multiples further strengthens the case that the timing for such a buyback is unlikely to get much better.”
Read more in the full article here.
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Einhorn and reputable don’t go together
Further… reputable and either Einhorn or Icahn don’t go together.
As has been said here many, many times: These guys are only out for their short term profits. They have ZERO care about what happens to Apple after they get their money and leave.
Carl, you cannot buy your way into heaven.
Activist doesn’t work, either. Makes me sick to compare these greedy short-sighted casino-style “investors” screwing up good companies and subverting the purpose of the market.
The activists (real ones on real issues) I know are trying to make the world a better place for everyone, not get rich quick.
“Reputable” activist. Yeah …
Don’t listen to the snake, Tim. Don’t let him tempt you with the forbidden fruit.
This is a false economy. It’s like saying: “interest rates are low, let’s remortgage the house so we can benefit from low payments.” Laughable!
Yes, interest rates are low. Let us go and buy a million dollar house we cannot afford !!
That’s not happening. Interest rates are low because no one can qualify for a mortgage anyway. Plus banks don’t want to lend right now; they’re making more money on their investments than they make on lending.
Keep this guy far far away from Apple.
It is a golden opportunity to keep expanding Apple’s tech advantage, not cater to wall street vultures.
It could be a golden opportunity to get rid of Wall Street and its vultures altogether.
@ JWW. Just suppose Apple does what sickan & iencorn want, so there are no shares because Apple have bought them all.
How does the stock increase in value if there are non to sell?
Now the banks get jittery because they no longer have a stock value for Apple inc. so they demand instant repayment or else they will bump up the interest rate Apple has to pay because they no longer have a market value. Does this ring a bell with what happened with house prices and mortgages? Who made a killing from the credit crunch? The house buyers?? So you want Apple inc. to become a house buyer???
YOU ASSWIPE!!!! Think before you blog!!!!
I agree with Icahn. It is a “no-brainer”!
Borrow cheap money to buy a stock whose share price is artificially depressed.
Geezz, guys. Wake up! The market is giving us a gift. Apple can borrow money at 2-4% and buy it’s stock for under $500 a share. It should borrow all the money is can and buy ALL the shares it can possibly buy.
Apple stock is going to $600, $700, $1,000. And it won’t be long before we hit those prices.
BUY CHEAP! and Apple stock is cheap right now.
Icahn is giving good advice, even though he may be a dickhead and can’t be trusted. Who cares? It’s still good advice.
Mr. Cook, BUY APPLE, BUY APPLE, BUY APPLE! 🙂
Have you even reviewed in detail the financing Apple did so far? I have. I extremely doubt you have.
You have no idea what the downsides are.
Go review the actual financing and long term debt Apple must incur to do a buyback like what Icahn is suggesting, and your position will change immediately — unless, of course, you don’t give a damn about Apple and only care about what profits you can reap in the short term. In that case there’s no hope for you.
If Apple could do a massive buyback WITHOUT incurring more debt, I’d be 100% for it. Unfortunately, that’s NOT the case. Apple incurring more debt to do such a massive buyback is absolutely asinine.
In my view, Apple shouldn’t expand the buyback unless they are absolutely sure that their earnings will balloon over the next couple of years.
It might be wiser to extend the buyback after this one is complete. No need to rush things, despite the historic borrowing opportunity.
Remember what happened in 90’s……
Apple had to beg money from enemy MICROSOFT…
DON’T get into the same situation…..SAVE your money…
Apple did not have to beg money from Microsoft. That is NOT at all how it came about. Anyone who truly believes that Apple had to grovel to Microsoft to get money from them does not know the details of the situation.
Actually the details about Apple financing and also the Microsoft deal are well-known. But please feel free to inform all of us poor uninformed about the minute details of Apple financing. As well as the inside story about Apple’s deal with Microsoft. You’re simply fabulous! Aren’t you?
Just curious but what exactly about Apple’s actual financing to date is a problem? I haven’t seen the details so I don’t know.
But based on the little I’ve read on the topic, it seemed like the money that Apple is paying on interest is more than made up for by not having to pay dividends on the shares they repurchased. Is that not the case ?
Honestly, the issue could be at Icahnis forcing up the price of the stock now by using these rumors. Without these rumors, Apple could already be buying a bunch of its stock back under the existing buyback plan. Icahn is just making things more expensive for Apple.
I think Apple should stop the buy back as long as Icahn and Einhorn have a share of AAPL. Every buy back gives them a greater share percentage of Apple.
No, not really, since everyone with stock gets the same amount of shares, it is entirely proportional to their holdings so they will have the roughly same % afterwards.
This.
Apple doesn’t benefit from its stock once it is purchased. The stock is retired as treasury stock. So it’s not like Apple gets to sell its own stock later (unless it goes through the process to issue new stock, including all of the regulations, filings, and costs).
The best reason for Apple to buy its stock is to get rid of Wall Street, hedge funds, and investors like Icahn. Then all this nonsense about needing to give money back to the shareholders can go away. That’s about it.
Tim should lend Icahn and Einhorn some cash to buy more AAPL.
Hey Icahn….Interest is cheap….Borrow money from bank..about 50Billion to buy Apple shares and you go Bankrupt….
If you think they used their own money to buy APPL you ought to think again. None of these guys use their own money, certainly not in a time of low interest rates. Why do you think they are hounding Tim?
We can only hope that they will “miss” it.
Wall Street is short sighted – they carry about becoming even richer right now – they do not care about Apple’s future if they can cash in now, and then feed off the carcass later.
Let Apple use their cash hoard the way that most makes sense to propel them in the future.
… and, of course, borrow money from us to do the stock buyback (yes, I know all the reasons why instead of repatriating foreign funds).
Rape and pillage – this is what Wall Street knows. They’ve done it to the American people, will do it again. Capitalism is good, but in its present iteration is self-destructive. If only 1 to 5% see the benefit of economic growth, it cannot be sustained. I don’t think they care at all about the future, just their wealth right now.
They’ll end up, with (their) politician’s help, crashing the country (again), but at some point the pieces can’t be put back together again. It won’t matter if they have billions of dollars if they aren’t worth anything.
We are in all of this together – until we figure out how to benefit everyone it cannot be sustained, it carries in it the seeds of its own destruction – greed (idea of capitalism is sound – but current “circus” allows pure money plays that add no value, and in some cases come crashing down and hurting everyone except the ones who made it happen – why aren’t the in prison again…?). Predatory economics (modern Atilla the Hun emulators) are doomed to fail. They probably don’t care, as long as it happens after they are gone (and by the way – won’t take a single penny with them to face the One who cares about how we treat one another, not whether we have riches and power)
Sorry for ranting – I just hate seeing Wall Street trying to boss Apple around and tell them what is supposedly good for Apple’s business, but in reality is only self-interest.
What you borrow, you have to pay back.
The market wants Apple to do this so they have some more leverage over them. They really hate it that Apple have 150BB in the bank and they can’t access it. Of course they forget that most of it is overseas. The buyback puts equity back into the market that previous was in Apple’s hands.
There are tax incentives for this so it is a legitimate approach for saving money but in no way will it impact Apple’s share price.
It most definitely will affect the share price. Less shares means more ownership of the company per share. Supply going down while demand remains the same means higher prices.
Of course, I’m assuming that demand will remain the same, which may not happen (although I don’t see why not).
The real question is whether an increased buyback will weaken Apple in the long term. We could see shares doubling if Apple gets into payments. At that point, it might be better to issue a buyback as a defensive move to prevent the stock from cratering again.
Why does this site suck so badly in Safari? If I use Chrome, the pages load almost instantly, but in Safari I get lots of blank white and a spinning beach ball. Or maybe it’s just Safari sucking?
It’s even worse on mobile Safari. Then again AppleInsider, iLounge, MacRumors and CultofMac are just as bad or worse. Oh, the irony.
I thought that this was going to be about a gold iPad–or lack thereof
Let’s plot this course:
1) Icahn buys $1B in AAPL
2) Icahn increases with another $1B in AAPL
3) Icahn pushes Apple to buy back stock
4) Eventually, Icahn’s holding amount to a sizable percentage of outstanding AAPL
5) Icahn pushes for a seat on the board
6) Icahn begins gutting Apple
7) Icahn makes billions
8) Apple goes the way of TWA
You forgot the part where he fires Tim Cook.
This is simply unrealistic. Apple is far more powerful than TWA ever was. Icahn is an ant.
That doesn’t mean that they should do the buyback, but investors shouldn’t be scared of little guys like Icahn. It’s the institutions that control the price levels.
You underestimate Icahn……He is like a Termite,,,,will eat up the whole building !
Icahn doesn’t act alone. He gets the institutions you speak of to work with him. They are similarly self-motivated. Therein lies the danger to Apple.
Honestly, I think Icahn saying anything about the meeting is a negative from management’s perspective. If he really wanted Apple to buy back more, why wouldn’t he just discuss it in secret? An increased buyback isn’t necessary when the current one hasn’t completed yet.
Also, I doubt interest rates will rise anytime soon, so I’m not sure the window is closing exactly as Icahn suggests.
I hope Tim does not get infected with any meta-viruses from Icahn. 😎
Apple needs to attract more mutual fund and retail investors. Until Tim Cook figures out how to piece the puzzle together, Apple stock is going nowhere. It would seem that increased dividends are in order to interest the dividend-seeking institutions and it certainly doesn’t hurt the small retail investor, either. Microsoft institutional ownership is at 70% in a post-PC era even with weak mobile prospects and a slow-selling Windows product. You mean to tell me Apple can’t do more to attract institutional investors while sitting on a far larger mountain of cash than Microsoft?
Wall Street artificial suppressed AAPL with intention to rob Apple pile of cash. It thinks of every possible scheme to rob Apple legitimately. This is a lesson for Apple to learn, don’t ever tell anyone how much money you have, you got to keep secret or else there are so many con artists going after you.
If Tim Cook caves in to these thugs, his mailbox is going to be full to the hilt with Publisher’s Clearinghouse and elderly robot insurance adverts.
What a d-bag…I don’t understand the strategy….make a big public push for a buyback…which drives up the price apple ultimately pays for its own stock when a buy back occurs…good for the company? Maybe hes going short. Why does Tim give this jack-ass the time o day???
@JWW. You must be a realtor because you talk like one.
How many people did you convince to buy houses because the interest rates were at an historic low?
How many people swallowed your spiel about banks giving money away for free because they were in excellent paying jobs?
How many people kept their excellent paying jobs or not so excellent paying jobs for that matter after the credit crunch?
We know that realtors make money selling houses, so when they are repossessed, it is another opportunity for a realtor to sell the same house again!
This is what the Ican but you cant people do. They make money buying stocks and selling them. They make money when a companies star is on the way up as well as when it is on the way down. What they do best as witnessed lately is their ability to talk shares up or down according to what will make them the most profit.
SO SHUT YOUR CAKEHOLE and let everyone else make up their own minds up without yours or anyone else’s strong arm tactics.
Many of you are missing the point.
1. Who cares what Icahn thinks or says? He’s a shark and a dick that will rape a company given the chance. But in this case he is correct. Just because the guys not nice doesn’t mean his advice is wrong.
2. Icahn is not shorting the stock. Some of you don’t understand how it works. Icahn bought the stock in the belief it’s going up, not down, which a short sale would suggest. Icahn wants the price to go up, way up. Taking shares out of the market and putting them in the company’s treasury would reduce the number of shares in the market causing a squeeze on the stock. That alone, regardless of what the company does, will cause the price to go up.
3. Longterm debt is inherently not bad or good. It depends on the terms and your situation. Apple can borrow a lot of money at a cheap price. Think of it as “free” money. Plus, the stock price is currently low so now is the time to buy its own shares. Apple should take advantage of the situation. Honestly, they would be crazy not to do this deal. Yes, Icahn and all those invested in Apple will make a killing, but Apple will be the one that REALLY makes the windfall.
The debt is nothing. It’s free money for Apple given their cash on hand and the low interest rate.
Think of it this way. A local bank will lend you $500,000 at 0% interest for 20 years to buy the house across from where you live. You happen to live in a neighborhood where the value of housing is increasing 20% a year. You have a secure job where you make $400,000 a year. In other words, you can EASILY afford to carry a second mortgage. What would you do?
Well, Apple is in a similar situation. Except in its case it’s not a house, its their own stock and they know that stock is going to go up in value much faster and higher than the house across the street.