“The world’s largest company confirmed plans this week in an SEC filing to launch a so-called Samurai bond priced in Japanese yen,” Michael Newberg reports for CNBC.
“The latest offering will be the fifth bond sale for Apple since 2013. And if history is any guide, a new Apple bond could signal another leg higher for the tech giant’s stock in the coming months,” Newberg reports. “Apple has gained, on average, 19.4 percent in the six months after the issue date of its last four bond offerings, according to data from Societe Generale’s head of U.S. strategy, Larry McDonald.”
“So does news of another bond offering, which some traders expect to price as early as Thursday, mean that now is the time to buy Apple?” Newberg reports. “According to Guy Adami of Private Advisor Group, the stock looks to be setting up technically for another move higher.”
Read more in the full article here.
MacDailyNews Take: Or it’s just coincidental.
It is not the issuing of bonds that causes the increase in AAPL. IT IS THE SUBSEQUENT BUYING BACK OF AAPL STOCK THAT CAUSES THE INCREASE. The issuing of bonds is for the purpose of buying back AAPL stock.
For instance, Apple plans to buy back $140 billion in Apple stock in the near future (which the bonds supply the cash). When Apple retires the $140 billion of it’s shares the number of shares go down. With fewer shares outstanding the earnings per share will go up even if Apple’s dollar earnings stay flat. When earnings per share go up Apple shares tend to go higher.
Apple’s market cap is currently $752 billion. The $140 billion buyback represents about 18.7% of the market cap. Hence we should expect that percentage of stock appreciation even if earnings stay the same. The key words are “should expect” because there many other factors that can affect the share price of Apple.
But of course Apple’s debt load increases by 140Billion or a smaller number that they choose to borrow through corporate bonds.
This is not a problem as long as Apple generates huge amounts of cash. It is also a way to return money to shareholders without the corporate income tax. It can be good for bond holders as they have a fixed rate of return. It can be good for share holders like you say- less amount of stock, higher expected price of each stock.
However, some don’t like large amounts of corporate debt because Apple now has to pay interest on the bonds. One of these people was Steve Jobs.
“However, some don’t like large amounts of corporate debt because Apple now has to pay interest on the bonds.”
True.
However, for those retired shares, Apple does not have to pay a dividend which is currently 1.6%. The interest paid on the bonds is reported to be 1.5% for 5 year to 3.5% for 30 year. Therefore some of the interest paid is offset by Apple’s reducing its dividend obligations.
In addition, the interest paid is tax deductible while the dividend payment is not. Therefore the interest tax deduction further reduces the effective bond interest payment.
clearly if AAPL’s BACN trajectories continue to rise with respect to EGG, adjusted +- BUN, quarter after quarter, we will see the same bumps we usually do.
You forgot to factor in the CHZ. 🖖😀⌚️
BondS …lead to buyback.. To tune Of 25% of float in total.. That is huge.
Wwdc next week, new product season few months away … Holiday season in 6 months …
It going up…. IMHO
The most astute and financially literate discussion of Apple and stock prices I’ve ever seen on an Apple-centric, non-financial site.
Cool beans…. 🙂
*admittedly not a super high threshold to cross, lolz, but even so….
Pretty astute observation Ice Cowboy (if that is your real mame)!
Hmmm. I bought AAPL in 1999 and I still have shares in the portfolio. All that “financially literate discussion” is way over my head – analogous to “I don’t know art, but I know what I like.” Apple stock going up 20% is a good thing if it happens.
As the old saying goes, “Don’t confuse coincidence with causality.”