Carl Icahn’s Apple buyback seen failing in bonds

“Apple Inc. bondholders are signaling investor Carl Icahn’s appeal for an additional $150 billion in share buybacks is little more than wishful thinking,” Charles Mead reports for Bloomberg.

“While Icahn, who supports funding the transaction with debt, said Oct. 1 that he ‘pushed hard’ for the repurchases during a dinner with Chief Executive Officer Tim Cook, the extra yield creditors demand to own Apple notes instead of Treasuries declined,” Mead reports. “That shows investors doubt the proposal will be adopted with the iPhone maker already returning $100 billion to shareholders in a program that included $16 billion of buybacks last quarter, according to Frost Investment Advisors LLC.”

Mead reports, “The dinner with Cook took place Sept. 30 at Icahn’s apartment in New York, when Apple’s $14 billion of fixed-coupon obligations paid about 75 basis points more than government securities, according to data compiled by Bloomberg. The next day, the world’s 37th-richest person said via Twitter that dialogue would continue in about three weeks, and Apple’s average spread ended yesterday at 72 basis points… ‘The reaction has been muted,’ said David Brown, a money manager who helps oversee about $93 billion of fixed-income assets, including Apple bonds, at Neuberger Berman in Chicago. ‘As of right now, the bond market is pricing a low probability of a massive share repurchase in the short term.'”

Read more in the full article here.


    1. The bottom line is that the large investors who would buy any next round of Apple bonds to fund another stock buyback are signalling that they are unlikely to be interested in that second round — unless the terms are much, much better, meaning higher rates.

      What they are saying is, “If you want to do this it will cost you significantly more.”

      I was never in favor of borrowing in order to do the first expanded buyback. With the almost guaranteed increase in interest rates on any second round of bonds I am adamantly against any borrowing to fund another increase in stock buyback. Everyone else should be against it too — even Cook (and even Icahn if he were interested in anyone other than just himself).

      1. Totally agree. Icahn is asset stripping. Given his way, Icahn would strip all asset value out of the company, leverage with debt to the maximum possible and then sell his Apple position. He and his kind are far and away the greatest threat to Apple.

  1. Apple needs to stay liquid and tell Carl to just hold on and Apple Stock will appreciate just fine.
    Going into debt to buy back stock is foolish. The 1970 leverage take over BS is not going to happen with Apple. He is a small fish is big pond this time. There’s no 9.9% ownership coming this time for Carl. Just cool your jets and everything will be fine.

  2. Is Carl Icahn gay? He seems to be meeting Tim Cook a lot for lunch & dinner. Maybe they have a shared agenda – one not just based on the price of Tooty Fruity Candy rolls alone.

  3. Carl still has a hard-on over all the attention he’s getting. He is responsible for driving the stock up a few weeks back.The man has a large ego. If things don’t go his way he’s going to throw a temper tantrum. He’ll have to show the world that he can drive the stock back down too. And unfortunately, he’ll do his best to make that happen. And probably succeed. He’s a prick. I just want to see him humiliated.

  4. Icahn is the front man for the major Wall St investment banks & hedge funds with large Apple holdings.

    Getting Apple to buyback shares via debt accomplishes 3 things they want:

    1) Raising the price of the stock by making less of it available (supply & demand forces instituted by somewhat artificial means – hedge funds are all for that)

    2) Providing another source of profit by milking Apple through the interest the company will incur after it borrows money for the stock buyback (this is what the investment banks want; not just a higher value of Apple stock, but also – because they are the only institutions large enough to provide the loans – a perpetual stream of income from Apple via interest payments)

    3) A larger say in Apple operations. This happens as a consequence of their holdings (as a percentage) of Apple’s outstanding stock rises once the number of shares decreases because of the buyback. Both banks & hedgies love this one – they’ll sell some stock, just to make a bit of money on the rising stock price, but not much. Instead they will watch as a once 2% stake rises to 3% … or 4 or 5 … however high … and their claim to be ‘owners’ of the company grows with it. As their stake grows, their ability to get Apple to give them even more free money grows with it (think higher dividends & even more debt financed buybacks). And of course, their ability to influence corporate strategy grows too. Seats on the board of directors often come with high stock ownership stakes.

    Tim made a serious mistake by acquiescing to these sharks’ demands once already. They smell the chum now & are circling the boat. Jobs wanted that money to provide Apple protection from the legalized mafia that is finance capitalism. With people & organizations of that type, you can never have too much to protect yourself. And you certainly don’t give it away to them.

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