I'd rather see a debt free company, than a larger cash hoard + increased debt...
If Apple doesn't have plans to make huge acquisitions I don't get it. Historically Apple makes small acquisitions.
I assume this practice is a result of a broken tax policy that keeps oversees earning oversees. Trump has said he's going to fix this... but Trump says at lot of things. This has gone as far back as President Clinton, and is a popular election topic, but interest (in actually doing something) wanes once they get in office.
I would like to know Apples plans, but the logic (as far as I can tell) is Bonds are a cheap way to grow the cash hoard, and the cash hoard does collect interest. Plus bringing the cash oversees home is to expensive...
I do wonder if this is a long term ploy to go Private. At some point Apple's stock is going to decline in value, that cash could be used to buy the outstanding shares.
Apple could benefit from being a Private company. They currently face significant disruption with product launches do to leaks, and analysts (often false) speculation.
There is not much point for Apple Analysts if a company doesn't have stock... also, there could be reduced regulation burden.
Apple could for example move their corporate headquarters to lessen the tax burden. Congress currently gets pissed about things like reverse-mergers, but I'm not sure they can actually do anything if a US Private company moves oversees.
The main reason for taking on the debt is so that Apple can return capital to shareholders through dividends and share buybacks. Apple reached a point where it had plenty of cash, so it decided to start returning capital to shareholders rather than just building a bigger and bigger cash pile. Over the last 5 years Apple has returned essentially all of its profits to shareholders - more than $200 billion worth. So, in that time, its cash net of debt hasn't grown a lot (it has grown a little because there differences between cash flows and profits).
In order to return that much capital, Apple has had to borrow. A lot of its cash hasn't been remitted to the parent company because of the tax issues which you allude to, so that cash can't be used to buy back shares or pay dividends. But having a lot of debt isn't really a problem when you have that much cash on the other side of the ledger. It isn't costing Apple much to carry that debt as compared to just using its existing cash (even without considering the taxes Apple would have to pay if it repatriated that cash), because Apple is considered a good credit risk and thus can issue debt at fairly low interest rates. That interest is offset by the interest it earns on the money it is thusly holding on to. Much of the cash that Apple has is loaned to other companies, similar to how other entities are loaning Apple money.
As for Apple going private: While that's theoretically possible, speaking practically it isn't really possible. Apple's market value is way too high. It would be incredibly difficult for someone (or, of course, a group of someone's) to pull together enough funding to take Apple private. It isn't going to happen, not anytime in the foreseeable future.
Pardon my ignorance, but is there a way for the public to purchase these bonds?
Why not just buy AAPL stock?
In this case, I'm most curious because the bonds are available in CAD. I'm in Toronto and most of my available $$ are CAD. Every AAPL stock purchase I make I have to convert CAD to USD and get hit on the conversion rate.
Which means you're kinda sorta investing in currencies as well when you purchase in a different currency, adding to the risk (or benefit). I started buying in 2010, the second year of the Tax Free Savings Account (TFSA) up here when the CAD was at par with the USD. The stock purchased then not only increased in its own intrinsic USD value but also in the total value in CAD, i.e. for every 100$ invested in AAPL then is now worth 125$ now give or take daily variations, a 25% added benefit.
I have also purchased more AAPL recently, which means that if AAPL grows 25% and the CAD climbs back to par with USD, we will lose that gain in the USD decline relative to CAD, i.e. every 125$ CAD we paid recently for 100$ USD of AAPL will be equal to the new 125$ USD value of AAPL and we will have gained nothing in our personal wealth compared to our American brethren of investors. The risk averse investors will probably want to go for local currency bonds.
I'd rather see a debt free company, than a larger cash hoard + increased debt...
If Apple doesn't have plans to make huge acquisitions I don't get it. Historically Apple makes small acquisitions.
I assume this practice is a result of a broken tax policy that keeps oversees earning oversees. Trump has said he's going to fix this... but Trump says at lot of things. This has gone as far back as President Clinton, and is a popular election topic, but interest (in actually doing something) wanes once they get in office.
I would like to know Apples plans, but the logic (as far as I can tell) is Bonds are a cheap way to grow the cash hoard, and the cash hoard does collect interest. Plus bringing the cash oversees home is to expensive...
I do wonder if this is a long term ploy to go Private. At some point Apple's stock is going to decline in value, that cash could be used to buy the outstanding shares.
Apple could benefit from being a Private company. They currently face significant disruption with product launches do to leaks, and analysts (often false) speculation.
There is not much point for Apple Analysts if a company doesn't have stock... also, there could be reduced regulation burden.
Apple could for example move their corporate headquarters to lessen the tax burden. Congress currently gets pissed about things like reverse-mergers, but I'm not sure they can actually do anything if a US Private company moves oversees.
It's cheaper to borrow the money than to bring their own money home, it's that simple. You nailed it in one of your assumptions.
Pardon my ignorance, but is there a way for the public to purchase these bonds?
Why not just buy AAPL stock?
On the one hand, I had a fair amount of AAPL stock but I was finding the fees unreasonable on the account I had, so I closed it. I haven't repurchased because the stock has been pretty steady since I sold and I'd like to see a dip before reinvesting, also because I haven't found a Canadian broker with reasonable enough fees to hold at about the same price for any amount of time.
The bonds are an alternative which may or may not have a lower cost to hold.
Comments
I have also purchased more AAPL recently, which means that if AAPL grows 25% and the CAD climbs back to par with USD, we will lose that gain in the USD decline relative to CAD, i.e. every 125$ CAD we paid recently for 100$ USD of AAPL will be equal to the new 125$ USD value of AAPL and we will have gained nothing in our personal wealth compared to our American brethren of investors. The risk averse investors will probably want to go for local currency bonds.
The bonds are an alternative which may or may not have a lower cost to hold.