Originally Posted by SolipsismX
Does Apple have the ability to buy back Apple shares with Options the way Al Gore did? That's a way they can buy a lot for a little if they can. My concern is the potential for any foul play but if a member of Apple's board can do it then I don't see why Apple themselves couldn't do it, but I admit this is beyond my ken, hence my query.
Al Gore had an option to buy 60,000 shares. He's been on the board for a long time, and the option, which was granted years ago, allowed him to buy those shares at $7.48/share. It's no different than anyone else who has stock options in that regard. Here's a story about this:
To answer your question, Apple is responsible for giving those share to Mr. Gore, as with any option being exercised. In the past, Apple would simply print new shares. That, of course, has the effect of "diluting" the EPS (Earnings Per Share). However, early in 2012, Apple both started paying a dividend on shares and initiated a $10 billion, three year buyback program. The share buyback is intended specifically to end the dilution of shares.
Ergo, it makes no sense for Apple to print shares it gives back to itself. That would literally be taking money out of one pocket and putting it in another.
(Note: A "buyback" program that would more than balance options dilution would, in effect, require Apple to buy stock back on the open market at market prices. Some people (myself included), are urging Apple to do just that. We see it as a better "investment" than most alternatives, especially at the present depressed price, since by doing so Apple would in effect be investing in itself. However, there is a body of thought that this sends the wrong message to investors, because usually a stock buyback is done in an attempt to support the stock price. There are even some who say even the moderate stock buyback that Apple has already committed to is responsible for some of the recent decline in Apple stock. I'm inclined to discount that, seeing other forces as being much more likely to be behind the drop. These include: Unreasonably heightened expectation in advance of fy 2012 Q3 earnings; unreasonably lowered expectations in advance of fy 2013 Q1 earnings; a general pulldown on high earning stocks over irrational fears concerning the "fiscal cliff" and related cap gains tax issues; natural stock volatility following Apple's lowest earning quarter (fy 2012 Q4); and irrational fears stirred up by certain "interested parties" concerning things like the "law" of large numbers, advancing competition, and out of proportion attacks over relatively trivial errors like Apple Maps, etcetera.)