Carl Icahn 'pushed hard' for $150B Apple share buyback at dinner with CEO Tim Cook

Posted:
in AAPL Investors edited January 2014
Apple Chief Executive Tim Cook met with billionaire investor Carl Icahn for dinner on Monday night, in a meeting in which Icahn pressured Cook to initiate a $150 billion buyback of AAPL stock.

Icahn


Icahn revealed his proposal in a post to Twitter on Tuesday. He didn't indicate how receptive Cook was to the idea, but did say the two parties plan to meet again before the month is over.

"Had a cordial dinner with Tim last night," Icahn wrote. "We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks."

The two parties had dinner in New York City on Monday, with Icahn pushing Cook to invest more in itself. He has previously said he believes shares of AAPL are "extremely undervalued" at their current price.

Icahn announced his bullish view on AAPL in August, an announcement that helped push shares temporarily past the $500 threshold. But they have since fallen back below that mark, and are well below the company's high of $702.10 reached a year ago.

Apple already has a share buyback program in place, in which the company plans to spend $100 billion in the next few years on it as well as an increased dividend. But Icahn believes Apple should spend more of its considerable cash and reserves on its own stock, particularly at its current price.

With the two parties set to talk again in three weeks, those discussions may come after Apple's next quarterly earnings conference call, which usually happens in the third week of October. It's possible that Apple could use that conference call to announce changes to its dividend or share buyback programs, or simply provide investors with an update on its cash position.
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Comments

  • Reply 1 of 58
    A buyback is the way to go. The EPS is increased and the dividend payout is reduced. Anything under $550 is an obvious return for shareholders.
  • Reply 2 of 58

    His addition to Apple is like Venom drop into the Milk. I dont like him to interfere with Apple. I am wrong. I know.:err: 

     

    Edit: Apple going private?  IMO.

  • Reply 3 of 58
    $150 Billion? REALLY? Isn't that just about all the money Apple currently has in its coffers?
  • Reply 4 of 58
    tundraboytundraboy Posts: 1,620member
    A share buy back is an artificial way to fix an 'undervalued' stock. Once Apple stops buying back stock, it would just fall back to the so-called 'undervalued' level. I view this as a ploy for short term investors to milk Apple of its cash. Of all the investors Apple should be rewarding, the short termers should be the last on their list.
  • Reply 5 of 58
    It doesn't matter what financial tactic Apple uses to lift its stock price. WS will keep it supressed -- look at the current valuation and with another 150B!? This is the most twisted stock on the planet
  • Reply 6 of 58
    tnsftnsf Posts: 203member
    Oh sure, lets just get rid of all cash on hand so that Apple can be like every other American company, operating on the edge of deficit and insolvency and unable to weather the slightest economic downturn. Sounds like a great long term strategy.
  • Reply 7 of 58
    allenbfallenbf Posts: 993member
    chandra69 wrote: »
    His addition to Apple is like Venom drop into the Milk. I dont like him to interfere with Apple. I am wrong. I know.:err:

    Exactly. I hope Cook tells him to pound sand, and I hate to pull the "wwsd" card, but I can only imagine what Steve would have told him lmao.

    *wwsd = "what would Steve do?" For those who might not know
  • Reply 8 of 58
    apple ][apple ][ Posts: 8,687member

    It's ridiculous that one person's tweets cause the stock to rise, but I took advantage of the tweet as soon as I saw it, and made some easy money today. Thanks AAPL and thanks Carl! <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

  • Reply 9 of 58
    maestro64maestro64 Posts: 4,642member
    Quote:

    Originally Posted by Chandra69 View Post

     

    His addition to Apple is like Venom drop into the Milk. I dont like him to interfere with Apple. I am wrong. I know.:err:


     

    Icahn is only worried about his pocket book at this point. As soon as I hear he was buying large amounts of shares I knew it was not going to go well for Apple. He claims he does this to make companies better and increase share holder value. He only interested in getting what he can in the short term even if it means destroying the company in the mean time. 

     

    I do not agree apple needs all that cash, but having that cash allows them to do things most companies can not do which is take the risk to innovate. 

     

    If you were a share holder and you knew that Apple was going to buy $150B in stock and you new that had to spend the money what should naturally happen with the stock, it should be going up, it is not, why because the market is doing everything that can to keep low, which also make no sense.

  • Reply 10 of 58
    maestro64maestro64 Posts: 4,642member
    Quote:
    Originally Posted by Apple ][ View Post

     

    It's ridiculous that one person's tweets cause the stock to rise, but I took advantage of the tweet as soon as I saw it, and made some easy money today. Thanks AAPL and thanks Carl! <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />


     

    The only way you're make any money on a few points raise in the stock price is if you buying $1M's of shares, it not worth buy 10 or even 100 shares to flip it in hopes to make a few hundreds of $.

     

    I do not believe Icahn tweet had anything to do with the price increase today, it was the market recovering a bit from the mess our governing is causing. If the government shut down for a few days that would be a good things it would save tax payers money. Oh yeah the senators and house rep still get paid even if they are not work.... so much for that

  • Reply 11 of 58

    The idea is not that they use their enormous cash hoard, but that they borrow the money. Buying the stock would cause it to rise to it's proper value, and since Apple would own more stock they would benefit.  Apple's cost of borrowing would be low, and the interest payments are a pre-tax expense which would lower their overall tax burden; and their net dividend payouts would also be reduced. 

     

    It's not a terrible idea.

  • Reply 12 of 58
    Quote:

    Originally Posted by VinitaBoy View Post



    $150 Billion? REALLY? Isn't that just about all the money Apple currently has in its coffers?

     

    Well, if it were to do it today, sure.  But the plan was to return $100 million to investors over a two year period.  Apple generates a lot of cash over 24 months.  But in order to do it, Apple would actually borrow cheap money since not all of it's money is in the US.  Icahn wants Apple to increase that plan by an additional $50 billion.

     

    The problem here is that Apple is already stepping out of its proverbial comfort zone by having any debt on the books.  The idea is that Apple's cash generation machine would retire that debt quickly before it started becoming a problem for them fiscally.  But Icahn is only looking out for his position as a shareholder...he's not running a company.  I doubt Apple wants any more debt on its books than it already considered.  The tech world is a dangerous place and fortunes can easily turn on you...just ask Blackberry.

     

    I expect that the board will consider the proposal, then politely turn him down.  Fortunately, Icahn's $1 billion of Apple shares isn't that big in the grand scheme of things for him make Cook and the board's life miserable, like what happened at Dell.

  • Reply 13 of 58
    flabberflabber Posts: 100member

    They don't "have" to do much of anything in my personal opinion. They earned that cash with the products/software they make. Buybacks cán (not always, but cán) be a good idea to reward shareholders. But to instantly shell out half of what you own (if we do go by that 300bln dollar amount) is simply a ridiculous percentage to "just pay out".

     

    Whenever I hear the name Carl Icahn I instantly have the words "greed" and "worst shareholder to have as a company" in my mind. He earns a lót of cash pushing companies to do what hé wants. Not to do what's good for the company. I sincerely hope that Tim Cook puts his heels in the sand and tells Icahn to suck a lollypop or something. A buyback wouldn't be a bad idea, but the amount that Icahn is proposing/pushing hard for is just ridiculous.

  • Reply 14 of 58
    apple ][apple ][ Posts: 8,687member
    Quote:

    Originally Posted by Maestro64 View Post

     

     

    The only way you're make any money on a few points raise in the stock price is if you buying $1M's of shares, it not worth buy 10 or even 100 shares to flip it in hopes to make a few hundreds of $.


     

    Of course it's not worth it if somebody is buying ten shares of AAPL. Ten shares is a total waste of time.

     

    I'm not buying $1 Million in shares, or anything close to that, but I have no complaints about the action today.

  • Reply 15 of 58

    I'd like to push Carl Ican off a cliff. Hard.

  • Reply 16 of 58
    Quote:
    Originally Posted by sog35 View Post

     

    Many of you are very ignorant about buybacks.  Very ignorant.  Fact is Apple has so much money they can't spend it wisely at this point.  They already have $150B in cash and they generate $40-$50B a year of free cash flows.  By the end of 2016 they will have over $300B.  Half of that going to buybacks won't hurt or stop Apple in any way. 

     

    Just look at IBM for reference.  They have bought back over 40% of their shares and have reward their shareholders.  With a $150B buyback Apple can decrease share count by 25%-30%.  That's a boost of EPS by the same percentage.  Thus all things equal the share price should increase by the same %.

     

    Sorry hording the $300B is not an option.  They would either have to return cash to shareholders or make aquisitions.  Large aquisitions rarely work.  Look at Google buying Motorola Mobile.  Looks nice on paper but they are losing almost a BILLION dollars a year on that 'investment'.  They bought Motorola for $13B and I'm almost 100% sure they won't recoup any of that money.  When all is said and done they may lose $20B.


     

    Just so you know... Apple is actually borrowing a lot of the money they are using to buy back shares.

     

    ... and the Moto purchase by Google... after deducting cash and tax breaks... about $4 billion total... not $12.5 billion.

  • Reply 17 of 58
    zabazaba Posts: 226member
    Icahn = Ic*nt
  • Reply 18 of 58
    jblongzjblongz Posts: 147member
    Quote:

    Originally Posted by Maestro64 View Post

     

     

    The only way you're make any money on a few points raise in the stock price is if you buying $1M's of shares, it not worth buy 10 or even 100 shares to flip it in hopes to make a few hundreds of $.


     

    Not true.  I buy several call and put options each week, which generates profits in both directions.  Even when I spent a microscopic $38 on a BIDU call option, it's now worth $320.

  • Reply 19 of 58
    Quote:

    Originally Posted by JBlongz View Post

     

     

    Not true.  I buy several call and put options each week, which generates profits in both directions.  Even when I spent a microscopic $38 on a BIDU call option, it's now worth $320.


     

    I say, if you can actually make a few extra buck each week with a few clicks of the keyboard... Go For It! What the hell. Since when is making any money a bad thing.

  • Reply 20 of 58
    apple ][apple ][ Posts: 8,687member
    Quote:
    Originally Posted by JBlongz View Post

     

     

    Not true.  I buy several call and put options each week, which generates profits in both directions.  Even when I spent a microscopic $38 on a BIDU call option, it's now worth $320.


     

    I'm not too well versed in the options game, but can you buy as little as one call option for $38 (for BIDU as you mentioned)?

     

    I thought that options were sold in lots of something like 50 or 100?

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