“It’s another day, and another media frenzy surrounds Carl Icahn, chairman of Icahn Enterprises. This time, Icahn took to social media to declare that he had dropped his bid for Apple to substantially increase its share buybacks,” Bob Ciura writes for The Motley Fool. “Icahn had long pushed for Apple to buy back as much as $50 billion of its own shares, putting to use some of the more than $150 billion in cash and investments Apple has on its books.”
“While Icahn backing off may seem like a victory for Apple, it doesn’t seem likely that he would simply give up. After all, he’s got a tremendous track record of latching onto companies and standing his ground until he gets what he wants,” Ciura writes. “Apple’s accelerated buyback means Icahn is already on the way to getting his wish. Plus, the prospect of new products from Apple this year means fresh revenue streams and an even greater opportunity for Apple to increase its buybacks later this year, if it chooses to do so.”
“All along, Icahn’s true motive was to produce a higher earnings multiple for Apple. For many investors like Icahn, share buybacks are the best way to accomplish that,” Ciura writes. “By buying back its own shares and reducing the number of shares outstanding, Apple could produce earnings-per-share growth with its own cash. That would, hopefully, result in multiple expansion as well.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
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