The ultimate buyback: Apple could go private in 2020

“Lately, there are a lot of discussions about whether Apple (AAPL) should increase its proposed buyback program in order to reward the investors more,” Jacob Steinberg writes for Seeking Alpha. “In the recent months, despite the strong rally in the highly-inflated market (thanks to the QE), Apple continues to be deeply discounted. When deciding whether a company is cheap or expensive, one could say many different things by looking at many different metrics. There is one thing that’s for sure though: if a company is cheap enough to buy itself, that company is probably a good bet.”

“Buybacks or not, Apple is likely to have a balance sheet strong enough to go private, if it chose to do so. This is especially true if the investors continue to ignore Apple’s achievements and keep the company deeply undervalued,” Steinberg writes. “In 2012, Apple’s operating cash flow was $50 billion. In the best case scenario, Apple continues to grow its operating cash flow at an annual rate of 15%. This would increase the company’s operating cash flow to $57.5 billion in 2014, $66.13 billion in 2015, $76.05 billion in 2016, $87.45 billion in 2017, $100.56 billion in 2018, $115.65 billion in 2019 and $133 billion in 2020. Combined together, the company would generate about $680 billion in operating cash flow between now and 2020. Add that to the company’s current cash balance of $150 billion, and the company would have more than enough cash to buy itself out and become private.”

Read more in the full article here.

39 Comments

  1. I’m starting another rumor. Apple is letting share price fall and won’t prop it up. When the price is low enough, Apple will buy all outstanding shares and go private. Of course Apple can be thwarted by rising stock price. 🙂

  2. What kind of incompetent fool wrote this article? He should go back to school and finish his Finance 101 class before writing anything so wrong! A another erroneous and ridiculous piece by Seeking Alpha.

  3. Didn’t read every single comment, so maybe someone who knows what they’re talking about chimed in.

    Businesses go from public to private all the time. The key difference here is that it generally comes from a place of weakness rather than strength. Most go private to avoid the glaring eyes of shareholders and analysts.

    When businesses go private, they don’t have to go out in the open market and buy every share at market prices. They create a tender offer, generally at a nice premium, under which everyone sells their shares at the pre-arranged price. There are no “last shareholders” holding out.

    Apple will never be a hostile takeover target like in Pretty Woman. They quite simply are too damn big. It would take a HUGE group to get organized and coordinated, and would take roughly 15-20 more financing than has ever been done before.

    The going private scenario here would be unprecedented, but is both plausible and probably sensible. No more outside influence from an impatient lot.

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