Apple ‘lost’ $9 billion this year by investing in itself or something

“Apple Inc. has lost more than $9 billion this year on an underperforming investment — its own stock,” Michael Rapoport and Theo Francis report for The Wall Street Journal. “Like many large companies, Apple has used much of its windfall from the 2017 tax overhaul to buy back shares. But the recent plunge in stock prices has made that look like a bad idea.”

“In effect, the market has told them they overpaid by billions of dollars,” Rapoport and Francis report. “Companies contend that buybacks are a good way to return excess capital to shareholders and that the paper losses can reverse themselves if their stocks rebound. But the sharp declines call into question their decision to devote so much of their tax savings to buybacks, rather than using it to invest in their businesses, raise employee pay or pay higher dividends. ‘If they made an acquisition that decreased in value this much, people would be up in arms,’ said Nell Minow, vice chairwoman of ValueEdge Advisors, a corporate-governance consulting firm. ‘They have one job, and that is to make good use of capital.'”

“Apple, one of the market’s biggest repurchasers, spent about $62.9 billion on buybacks in the first nine months of 2018, according to securities filings,” Rapoport and Francis report. “The company’s repurchased shares were worth about $53.8 billion as of Wednesday’s close, some $9.1 billion less than it paid for them. Apple repurchased shares at monthly average prices as high as $222.07, according to securities filings. The stock closed at $157.17 Wednesday.”

Read more in the full article here.

MacDailyNews Take: Non-news or, more precisely, nonsense news.

Nobody “lost” anything on their Apple investments this year unless they sold their shares at a loss.

It doesn’t matter to Apple what the price was versus is, per se, it only really matters to Apple (and to shareholders) that those shares were retired (or converted into RSUs for employees; another form of self-investment). Apple’s buybacks this year have reduced AAPL shares outstanding by some 6.7% – quite a significant amount!

In a year or two, let’s check what the value of those shares would be. We highly doubt it will be -$9 billion (or negative at all). And then The Wall Street Journal can write another silly story about what a great investment Apple made in calendar 2018 quarters one, two, and three by investing in itself.

12 Comments

  1. Apple spent nearly 60 billion dollars on share buy backs, with the purpose of that to increase shareholder value.

    That was an epic fail as the price per share has plunged 30% in the past 7 weeks.

    60 billion dollars! Flushed down the toilet.

    Like an idiot, I held onto my stock during this epic collapse in value. Now i’m bag holding to the tune of $40 a share. That value will not return any time soon. Investors have no faith at all in Apple. None!

    1. It all depends when you bought your shares. I bought mine in 2007 and still have a gain of 1500%. There have been many large drops since then but I haven’t sold yet.
      When I think Apple is no loner worth the investment then I will sell. Now is certainly not the time.

      1. I bought my Apple shares in 2004 and haven’t sold any along the way, so this recent drop doesn’t mean all that much to me. Sure, I don’t like how the market fluctuates down so quickly, but with the big crooks running WS, I can only ride with the flow. It sure seems as though big investors don’t have any faith in Apple, considering Apple’s relatively low P/E. However, I do have faith Apple’s share price will climb again when the market turns around.

        Apple’s buybacks certainly haven’t stopped the volatility of the stock like I thought it would. Apple’s iPhone business looks to be in a bad place right now and the news media keeps magnifying this. All I can do is hope for the best and by the middle of next year, things will be better for Apple shareholders with a higher dividend and the stock price back to around $210 or so. I’m in for the long run and I’ll let the short-term investors do all the panicking.

    2. I think the real Alan Greenspan would recognize that if it had not been for the buybacks, the paper loss to shareholders would have been 6.7% greater than it actually was. He would have suggested that anybody who expected the buybacks to increase shareholder value in the very short run was a fool, and that a fool and his money are soon separated.

    3. Von Tinkler
      As i have suggested to u before.. you are not cutout for the market..
      You are too neurotic to survive the treacheries of the market.

      Or learn to chill a bit and invest for the long term and push your horizon down the line.
      U cant worry about every ripple or wave along the journey .. it will destroy you. …
      As it it obvious its taking its toll on u and your nerves already.

      Anyway, look…
      If u have not sold anything yet. Then you have not lost anything.

      If u believe in Apple then look at your investment with the long term in mind….. And in the meanwhile enjoy or reinvest your dividends .

      If u dont believe in Apple then u should not have bought its shares to start with .. let alone at near all time high.

  2. Don’t take the “talking head” drivel to heart……they play this game all the time and given the “butt-hurt” analysts tantrum on not getting iPhone unit sales the Apple is doommmmed BS is placed on top of allllllll the other things.

    Buy the dips, enjoy the dividends while you wait and the stock will come back sooner than you think!!!

  3. Yup ! ..buy backs are not an investment in value gain on Apples side…..But for the owners of outstanding stocks it results into value gain.
    Buy backs are a way of returning cash to the stock owner.
    Apple is not buying their own stock to see returns in form of stock value gain. Those stocks get retired.. there is no stock there to gain value after whats bought is retired.

    The primery purpose is to reduce number of shares, which in return boosts EPS which directly effects value of stock for the stock owner.

    Unbelievable …how do idiots writing the WSJ article or alike even qualify to get the job.. ?
    Or maybe it is by design….?

    One thing is super clear to me though….For whatever reason, Apple has a bullseye painted on its back 24-7 .

  4. There’s more to consider than whether or not the buyback reduces the share count and thus gooses the per-share earnings at the end of the quarter. The larger questions concerns how Apple chooses to deploy its cash. When a company is as cash-rich as Apple, and in this environment, o course you’re going to pull the trigger on a mix of buybacks and dividends. In this case, the timing of the buybacks was ill-considered. As I type these words Apple shares are trading at nearly 29 percent off the average price it paid in the buyback. That’s a $9 billion bad decision by someone at Braeburn Capital in Reno. (Google that if you don’t know what it is.) If you’re a long-term Apple shareholder then the fair question to ask is this: Why wasn’t the dividend bigger?

    1. And while I’m at it — Theo Francis at The Wall Street Journal is an old friend and colleague who knows more about the accounting rules that large company must follow than anyone here. But MacDailyNews and its readers have never really been known for their financial acumen.

  5. One has to ask, if Apple took the 200B+ in buy backs and bought tesla for 50B, netflix for 115B and twitter for 25B, AMD for 18B, TiVo for 1B, DuckDuckGo (going to guess 3B), and then did buy backs with the remainder, would the stock be the same, lower or higher.

    I was a fan of buy backs, but I get the feeling they didnt help the stock value as much as the above acquisitions would have.

    Could be wrong, it’s just speculation.

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