“Apple has bought back a truly staggering amount of stock so far in 2018 following the passage of tax reform a year ago,” Evan Niu writes for The Motley Fool. “Through the first three quarters of 2018, the company had repurchased $62.9 billion in stock, and will likely end up buying back over $80 billion in 2018 after everything is said and done.”
“Markets have been in complete disarray over the past three months, with volatility skyrocketing and stocks getting relentlessly hammered nearly every day. Apple shares have lost about a third of their value after peaking in early October, and the stock is now down about 7% year to date,” Niu writes. “That’s led to The Wall Street Journal (subscription required) arguing that Apple has now lost $9 billion by repurchasing all those shares. But that’s not exactly true.”
“Here’s the thing: Those shares don’t exist anymore. When Apple repurchases its stock, it retires those shares, reducing its total number of shares outstanding,” Niu writes. “It’s not as if Apple was buying back its stock with the intention of reselling (or reissuing through a secondary offering) those shares at a future date for a gain. The only real way you tangibly destroy shareholder value is if you repurchase shares and then resell them at a loss shortly thereafter.”
Read more in the full article here.
MacDailyNews Take: Shouldn’t The Wall Street Journal, of all things, understand investing, share repurchases, P/E ratios, earnings accretion, dividend payout reductions, and the like?
And, on top of it, they have the gall to (try to) charge subscriptions for pure crap like that. Amazing.
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. — MacDailyNews, December 28, 2018
SEE ALSO:
Apple ‘lost’ $9 billion this year by investing in itself or something – December 28, 2018
The WSJ and Bloomberg have turned themselves into pimps. Where both once had strong journalistic standards and could be trusted to stick close to the truth, now they are just whores for advertising dollars. Say anything, write anything for some clicks. To hell with truth and integrity. They’ve turned into TMZ of the finance/business world.
Some of you may recall General Semantics. It was a philosophy (some would argue a pseudoscience or cult) developed in the 1930s that reached a peak in popularity in the 50s. To grossly oversimplify one of its better points, it argued that human life could be greatly improved if we just stopped identifying our notions of reality with reality itself. We need to consciously fight our tendency to assume a one-to-one correspondence between the subjective portrait of the world in our heads and the objective facts “out there.” A mantra of the movement was “The map is not the territory.”
The application here is that the price of a company’s stock reflects something subjective in the minds of investors, not an objective appraisal of the company itself. To suggest that the price of APPL reflects the totality of Apple as a going concern is to confuse the map with the territory. Yes, a drop in price might reflect a flaw in the company, but not necessarily. It might just be that a company that is as successful as it ever was (in terms of income and customer satisfaction) is losing share value due to factors that are not rooted in reality. For stock prices, subjective perception is determinative; for company success, profits are far more important.
That is a post i love !
Thanks 😉
Yup ! .
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 like normal shateholders do. Stocks bought back get retired.. there is no stock there to gain value or lose value after whats bought is retired.
The primery purpose of buyback is to reduce number of shares, which in return boosts EPS which directly effects the 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 .
The ideal situation would be for Apple to go private again, so it can fulfill its vision faster – without the quarterly, short-term expectations of Wall Street.
Vision? What vision? Steve Jobs said: “A computer for the rest of us” I take as a statement of empowerment for the people. Tim Cook on the other hand mouthed this meaningless drivel as a “vision”:
“We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.”
So again how will taking Apple private accelerate this “vision.”
Watch what happens when Apple increases its dividend in May. With the same amount of money to distribute over a fewer number of shares, the dividends per share should increase by 12% or more is my guess. Glad I own Apple stock.
If the cash is paid out to shareholders in the form of dividends, then the shareholders win. They can reinvest the dividends, if they so choose.
If the cash is used to repurchase stock, to drive up the share price, then the executives with stock options win. The existing shareholders still win, but less than they would have won.
So, the executives are enriching themselves at the expense of shareholders.
If the executives wanted everyone to win, they’d invest the cash in R&D to create new products, and drive the share price up through additional sales and earnings.