“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.