Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
You might want to save that fine crow for New Year.
iPhone was down nearly 10% YoY.
The blowout quarter is next up and might prove to be a turnaround moment but even then, it will be a hard slog through to the iPhone 12 (and 5G).
I'm guessing China has left a gaping hole in handset revenues.
You don't get it. It was more-than-fully factored in to the company's performance (hence the stock price), and actually outperformed expectations.
In fact, this is actually good news for the 12, because it creates less of a hurdle to leap in 2020 with respect to unit sales. Moreover, anything that makes Apple pivot with merely a moderate financial impact resulting from the iPhone (and even more so, China) being a smaller and smaller portion of their revenue is great news for the company.
Clearly, their game now is in services (which will be far less dependent on China), and that is a far bigger issue for the market.
Yes, that's fine.
I thought your earlier comments (not in this thread) had been on iPhone performance because that is all you mentioned in this thread. iPhone.
In an iPhone context (Apple's largest revenue driver by a long shot) your original comments wouldn't have been anywhere at all off the mark.
If you're talking about Apple's business as a whole though, even your original comments would have been on shaky ground.
It's important to establish the correct context.
If we are talking about Apple today and comparing to the Apple of old (Apple Computer), even if you eliminate everything from the iPhone on, the company (the computer company) would be healthier now than it was back in those days.
That aspect has been clear for years.
What really changed everything from a revenue perspective was the iPhone and the iPhone alone. Even to the point of completely overshadowing the Mac business (and even today, at its healthiest).
That's why Apple's 'health' for the last seven or eight years has been 'measured' in iPhone performance and iPhone alone.
When they issued the profit warning it wasn't really because of the Mac or services. It was mainly due to iPhone.
A sign that iPhone remains the marker that everyone (rightly or wrongly, depending on opinions) uses to represent the health of the company.
It was only recently remember that iPhone dipped below 50% of its total earnings.
My comment in this thread was on that: a nearly 10% drop in iPhone revenue YoY.
There are a few people right here in this thread, who only two or three years ago were claiming none of what has happened over those years would happen. Apple was a premium company with premium products, market share was irrevelant, the competition couldn't touch them, users wanted the 'ecosystem', iPhone was the 'king of the hill'.
And I mean iPhone. When they spoke of 'premium', 'pricing' and marketshare, they were explicitly referencing iPhone (not irrationally because the reality was the reality- Apple was the iPhone company).
Some literally laughed at the prospect of Huawei even being able to get near Apple.
Thankfully, it's all here in the forum archives.
What has changed though is that everything they said wouldn't happen, actually did and they've been dealing with that for four years now.
So, what do they do? Now, they put everything they said under the rug and look elsewhere (services, wearables, etc).
Some were jumping for joy when iPhone X became the 'most popular phone' but failed to see the bigger picture. When the year was up, sales were still flat or down. It has been exactly the same this year.
Tim Cook logically tries to put a brave face on it and spin things as best he can. Take China. Minus 2 today is better than minus 20 yesterday. It is, but it's still a minus and an almost 10% drop YoY is still reality today.
We'll see how things go for their customary blowout quarter.
You might want to save that fine crow for New Year.
iPhone was down nearly 10% YoY.
The blowout quarter is next up and might prove to be a turnaround moment but even then, it will be a hard slog through to the iPhone 12 (and 5G).
I'm guessing China has left a gaping hole in handset revenues.
You don't get it. It was more-than-fully factored in to the company's performance (hence the stock price), and actually outperformed expectations.
In fact, this is actually good news for the 12, because it creates less of a hurdle to leap in 2020 with respect to unit sales. Moreover, anything that makes Apple pivot with merely a moderate financial impact resulting from the iPhone (and even more so, China) being a smaller and smaller portion of their revenue is great news for the company.
Clearly, their game now is in services (which will be far less dependent on China), and that is a far bigger issue for the market.
Yes, that's fine.
I thought your earlier comments (not in this thread) had been on iPhone performance because that is all you mentioned in this thread. iPhone.
In an iPhone context (Apple's largest revenue driver by a long shot) your original comments wouldn't have been anywhere at all off the mark.
If you're talking about Apple's business as a whole though, even your original comments would have been on shaky ground.
It's important to establish the correct context.
If we are talking about Apple today and comparing to the Apple of old (Apple Computer), even if you eliminate everything from the iPhone on, the company (the computer company) would be healthier now than it was back in those days.
That aspect has been clear for years.
What really changed everything from a revenue perspective was the iPhone and the iPhone alone. Even to the point of completely overshadowing the Mac business (and even today, at its healthiest).
That's why Apple's 'health' for the last seven or eight years has been 'measured' in iPhone performance and iPhone alone.
When they issued the profit warning it wasn't really because of the Mac or services. It was mainly due to iPhone.
A sign that iPhone remains the marker that everyone (rightly or wrongly, depending on opinions) uses to represent the health of the company.
It was only recently remember that iPhone dipped below 50% of its total earnings.
My comment in this thread was on that: a nearly 10% drop in iPhone revenue YoY.
There are a few people right here in this thread, who only two or three years ago were claiming none of what has happened over those years would happen. Apple was a premium company with premium products, market share was irrevelant, the competition couldn't touch them, users wanted the 'ecosystem', iPhone was the 'king of the hill'.
And I mean iPhone. When they spoke of 'premium', 'pricing' and marketshare, they were explicitly referencing iPhone (not irrationally because the reality was the reality- Apple was the iPhone company).
Some literally laughed at the prospect of Huawei even being able to get near Apple.
Thankfully, it's all here in the forum archives.
What has changed though is that everything they said wouldn't happen, actually did and they've been dealing with that for four years now.
So, what do they do? Now, they put everything they said under the rug and look elsewhere (services, wearables, etc).
Some were jumping for joy when iPhone X became the 'most popular phone' but failed to see the bigger picture. When the year was up, sales were still flat or down. It has been exactly the same this year.
Tim Cook logically tries to put a brave face on it and spin things as best he can. Take China. Minus 2 today is better than minus 20 yesterday. It is, but it's still a minus and an almost 10% drop YoY is still reality today.
We'll see how things go for their customary blowout quarter.
The only metric that Huawei beats Apple iPhone is units sold, but of course, the ASP is a third of Apple's and the margins are less than a quarter of Apple's.
You might want to save that fine crow for New Year.
iPhone was down nearly 10% YoY.
The blowout quarter is next up and might prove to be a turnaround moment but even then, it will be a hard slog through to the iPhone 12 (and 5G).
I'm guessing China has left a gaping hole in handset revenues.
You don't get it. It was more-than-fully factored in to the company's performance (hence the stock price), and actually outperformed expectations.
In fact, this is actually good news for the 12, because it creates less of a hurdle to leap in 2020 with respect to unit sales. Moreover, anything that makes Apple pivot with merely a moderate financial impact resulting from the iPhone (and even more so, China) being a smaller and smaller portion of their revenue is great news for the company.
Clearly, their game now is in services (which will be far less dependent on China), and that is a far bigger issue for the market.
That's why Apple's 'health' for the last seven or eight years has been 'measured' in iPhone performance and iPhone alone. [...]
My comment in this thread was on that: a nearly 10% drop in iPhone revenue YoY.
There are a few people right here in this thread, who only two or three years ago were claiming none of what has happened over those years would happen. Apple was a premium company with premium products, market share was irrevelant, the competition couldn't touch them, users wanted the 'ecosystem', iPhone was the 'king of the hill'. [...]
Thankfully, it's all here in the forum archives.
Who on this thread, specifically, said growth of iPhone would continue to growth for all of time? Or was the marker of health for the company? No one I know. Profit is king. Profit is the marker of health for a company, because "profit is the air corporations breathe". iPhone has been an amazing phenomenon, the most successful consumer good of all time, as measured by revenue and more importantly (wait for it...) profit. Yet we see even as iPhone goes down, total profit remains. Record 3rd quarter.
As for market share, what people have said remains correct -- market share is not an indicator of health, but profit is. Apple has always been comfortable with its much smaller market share, and boss profit share. Apple does not worship at the Church of Market Share.
So what on earth are you talking about? Yes by all means, show us in the archives.
You might want to save that fine crow for New Year.
iPhone was down nearly 10% YoY.
The blowout quarter is next up and might prove to be a turnaround moment but even then, it will be a hard slog through to the iPhone 12 (and 5G).
I'm guessing China has left a gaping hole in handset revenues.
You don't get it. It was more-than-fully factored in to the company's performance (hence the stock price), and actually outperformed expectations.
In fact, this is actually good news for the 12, because it creates less of a hurdle to leap in 2020 with respect to unit sales. Moreover, anything that makes Apple pivot with merely a moderate financial impact resulting from the iPhone (and even more so, China) being a smaller and smaller portion of their revenue is great news for the company.
Clearly, their game now is in services (which will be far less dependent on China), and that is a far bigger issue for the market.
That's why Apple's 'health' for the last seven or eight years has been 'measured' in iPhone performance and iPhone alone. [...]
My comment in this thread was on that: a nearly 10% drop in iPhone revenue YoY.
There are a few people right here in this thread, who only two or three years ago were claiming none of what has happened over those years would happen. Apple was a premium company with premium products, market share was irrevelant, the competition couldn't touch them, users wanted the 'ecosystem', iPhone was the 'king of the hill'. [...]
Thankfully, it's all here in the forum archives.
Who on this thread, specifically, said growth of iPhone would continue to growth for all of time? Or was the marker of health for the company? No one I know. Profit is king. Profit is the marker of health for a company, because "profit is the air corporations breathe". iPhone has been an amazing phenomenon, the most successful consumer good of all time, as measured by revenue and more importantly (wait for it...) profit. Yet we see even as iPhone goes down, total profit remains. Record 3rd quarter.
As for market share, what people have said remains correct -- market share is not an indicator of health, but profit is. Apple has always been comfortable with its much smaller market share, and boss profit share. Apple does not worship at the Church of Market Share.
So what on earth are you talking about? Yes by all means, show us in the archives.
Avon b7 is stuck in a rut where he can only comprehend units sales, specifically iPhone vs Huawei, whereas the rest of the world that is focussed on Apple has moved on.
Soon, if it isn't already happening, Android OS devices will hit the same unit sales plateau, even Huawei, known for its low margins.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
That’s the question, isn’t it? Apple was pushed to buy shares back by activist investors who have had their own interest at heart, not Apple’s. That’s what this is always about.
I’ll keep on saying it, there is no evidence that share buybacks have a real impact on share pricing. There never has been. Major investors like it because of other reasons as well as the assumed share rise, which really can’t be proven. As Warren Buffet recently said at the last Berkshire Hathaway conference when asked about Apple share buybacks (paraphrasing):
”I like it because we increase our percentage of the company without spending a single extra penny.” How does that benefit Apple? It doesn’t.
companies throw that money down the black hole, never to be seen again. Instead, they could use it for R&D, manufacturing modernization and capacity, marketing, etc. Instead, Apple has borrowed over $110 billion for this purpose. They had no long term debt before, and almost no medium term debt either.
Apple’s stock movement is a result of sales and profits, margins, estimated next quarter results, expected technology advances and, of course, general economic and political situations. There are more subtle reasons such supplier’s quarterly results, currency exchange rates and hedging, and others.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
That’s the question, isn’t it? Apple was pushed to buy shares back by activist investors who have had their own interest at heart, not Apple’s. That’s what this is always about.
I’ll keep on saying it, there is no evidence that share buybacks have a real impact on share pricing. There never has been. Major investors like it because of other reasons as well as the assumed share rise, which really can’t be proven. As warren. Unfettered recently said at the last Berkshire Hathaway conference when asked about Apple share buybacks (paraphrasing):
”I like it because we increase our percentage of the company without spending a single extra penny.” How does that benefit Apple? It doesn’t.
companies throw that money down the black hole, never to be seen again. Instead, they could use it for R&D, manufacturing modernization and capacity, marketing, etc. Instead, Apple has borrowed over $110 billion for this purpose. They had no long term debt before, and almost no medium term debt either.
Apple’s stock movement is a result of sales and profits, margins, estimated next quarter results, expected technology advances and, of course, general economic and political situations. There are more subtle reasons such supplier’s quarterly results, currency exchange rates and hedging, and others.
Apple’s stock buyback seems to be a strategy without a goal. Since the stock is nearing fair value they should end the buyback. If the economy collapses and the stock market implodes again (I don’t see this happening at this time) then it would be good idea for an accelerated buyback.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I was going to put this in my last post, but it was long enough. I want to address the “dividend problem”. I have a fair number of shares. Dividends are welcome. In fact, I believe that with the rising share price that apple should, in order to look like a good investment, increase the dividend percentage. The amount of money used for share repurchase and dividend allowance is heavily skewed towards share repurchases. As a shareholder, I’m not happy about that.
But looking at it from the perspective of management, I see it differently. Share repurchases can vary widely, year to year, based on pricing, business trends, etc. But dividends need to be steady. Increases are good, and Cook has promised yearly increases (but not by how much). But to cut a dividend is very bad. It indicates problems, and is normally avoided until the last minute. A decrease in repurchases isn’t going to be viewed with alarm as long as there aren’t major business downgrades, but a slight slip in dividend rates could sent the stock plummeting, along with confidence in the company.
so companies consider dividends that can at least be maintained until the company is on the ropes. Therefor, they try not to offer high percentages, unless they are regulated companies such as power companies whose profits are regulated by law.
cook has expressed skepticism about special dividends, which, as long as they’re not used with regularity, can be offered now and again as a way to siphon off excess cash. I don’t know why, and I don’t believe he’s stated a reason. So a “series” of smaller special dividends would be viewed as a regular dividend offered at more highly spaced out intervals. It wouldn’t solve that problem. But a large special dividend, offered at an irregular interval, spaced years apart, could do it.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
That’s the question, isn’t it? Apple was pushed to buy shares back by activist investors who have had their own interest at heart, not Apple’s. That’s what this is always about.
I’ll keep on saying it, there is no evidence that share buybacks have a real impact on share pricing. There never has been. Major investors like it because of other reasons as well as the assumed share rise, which really can’t be proven. As warren. Unfettered recently said at the last Berkshire Hathaway conference when asked about Apple share buybacks (paraphrasing):
”I like it because we increase our percentage of the company without spending a single extra penny.” How does that benefit Apple? It doesn’t.
companies throw that money down the black hole, never to be seen again. Instead, they could use it for R&D, manufacturing modernization and capacity, marketing, etc. Instead, Apple has borrowed over $110 billion for this purpose. They had no long term debt before, and almost no medium term debt either.
Apple’s stock movement is a result of sales and profits, margins, estimated next quarter results, expected technology advances and, of course, general economic and political situations. There are more subtle reasons such supplier’s quarterly results, currency exchange rates and hedging, and others.
Apple’s stock buyback seems to be a strategy without a goal. Since the stock is nearing fair value they should end the buyback. If the economy collapses and the stock market implodes again (I don’t see this happening at this time) then it would be good idea for an accelerated buyback.
The goal, as Cook and Majestri, state it, is to be balanced in cash. Having the amount of money needed to run the company, plus enough for unexpected opportunities and economic setbacks. That’s the strategy. It’s actually a good strategy. I just don’t agree with the way they’re going about it. There are far better ways to spend that money. But that’s true of every company involved in buybacks, not just Apple.
and, what’s a fair value? Every single time Apple hits a number, I read that they should stop buybacks because the stock is fully valued. Each time, the stock moves to new highs. So while I’m not in favor of buybacks, which I suppose most people know by now, we don’t know what fully valued, or fair valued means in conjunction with that current price.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
ETC ETC.
You could have saved a few hundred words and said "I don't know, but I have faith it has made some unmeasurable difference in the share price".
Some of the finest investment minds disagree about the usefulness of buybacks. For example Mr Buffett likes Apple doing so. At the same times its almost unheard of with his own company and his top lieutenant, Thomas Munger, is not fan of them at all. In general he sees them as an unwise use of corporate cash with too many CEO's simply playing follow the leader.
Like the argument some folks use to dismiss religion I like to see verifiable evidence that a business plan I've committed to is performing.
"Hope springs eternal" or "Diamonds (or Gold) are forever". I'm more a fan of the second one. You're good with the first and that's OK.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
You could have saved a few hundred words and said "I don't know, but I have faith it has made some unmeasurable difference in the share price".
Even the some of the finest market minds disagree about the usefulness of buybacks. For example Mr Buffett likes Apple doing so, but it's almost unheard of with his own company. On top of that his top lieutenant Thomas Munger is not fan of them at all, in general sees them as an unwise use of corporate cash with too many CEO's simply playing follow the leader.
Like some folks use to dismiss religion I like to see verifiable evidence that a business plan I've committed to is performing.
If that had been my position, I might have said that. But that is not at all my position.
For my purposes, I know that the buybacks have helped to increase the share price. The numbers don't leave much room to credibly argue to the contrary. It's just that, you can't prove such counterfactuals. You can be sure, within the limits of reasonableness; but you can't definitely prove them. That's just something that we, as humans, accept. I can't prove that, if I were to let go of this egg, it would fall to the pavement 5 feet below and crack. The only way I can prove that is to let go of this egg. But, based on what I know about, e.g., gravity and the physical properties of eggs, I can be all but certain that that is what would happen. I don't need to get hung up on the reality that I can't prove what would happen in the counterfactual where I don't let go of the egg. I can, as a result of a basic life skill, act based on my confidence in what would happen if I did something different. I'm sure enough of what would happen to make decisions based on that surety.
Do you think that the market would value Apple $600 billion more today if, with other things being equal, it had an extra $300 billion in net cash on its books? I don't think so. Indeed, I'm sure that wouldn't be the case. And if that wouldn't be the case, then the share buybacks have (as compared to having continued to hold that cash) helped to increase Apple's share price. In some cases the assessment of the benefits of buybacks is a close call. In this case, it isn't a close call.
The reality about buybacks is that the appropriateness of them depends on the circumstances. In some circumstances they don't make sense. In others they do. If a company has large amounts of cash that it doesn't believe it will have other use for, and if it believes that its shares are currently significantly underpriced, then it should buy back shares. It's nearly a no-brainer.
I'm not generally a fan of corporations I own returning capital to shareholders. I think the fundamental point of equity investment is that I expect the corporations I own can or will make better use of the capital at the time than I otherwise will. But at some point - when they have so much in retained earnings which they don't think it makes sense to otherwise use - returning that capital to shareholders is what makes sense. That possibility has to always be out there or there'd be no point to investing in equities - there'd be no reason for share prices to increase.
EDITED to add: In this case, there is evidence that the share buybacks have helped Apple's share price. But there isn't, as you seem to seek, definitely proof to that effect. That's in part because there could be no such definitive proof. In order to find that, you'd need to be able to simultaneously observe two parallel universes - one in which Apple didn't do the buybacks and one in which it did, but where everything else in those universes was the same. Again, we're talking about a counterfactual. There can't be definitive proof of the sort you seem to seek. There is however, if we consider various measures, convincing indications that Apple's share buybacks have helped its share price.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
You could have saved a few hundred words and said "I don't know, but I have faith it has made some unmeasurable difference in the share price".
Even the some of the finest market minds disagree about the usefulness of buybacks. For example Mr Buffett likes Apple doing so, but it's almost unheard of with his own company. On top of that his top lieutenant Thomas Munger is not fan of them at all, in general sees them as an unwise use of corporate cash with too many CEO's simply playing follow the leader.
Like some folks use to dismiss religion I like to see verifiable evidence that a business plan I've committed to is performing.
If that had been my position, I might have said that. But that is not at all my position.
For my purposes, I know that the buybacks have helped to increase the share price. The numbers don't leave much room to credibly argue to the contrary. It's just that, you can't prove such counterfactuals. You can be sure, within the limits of reasonableness; but you can't definitely prove them. That's just something that we, as humans, accept. I can't prove that, if I were to let go of this egg, it would fall to the pavement 5 feet below and crack. The only way I can prove that is to let go of this egg. But, based on what I know about, e.g., gravity and the physical properties of eggs, I can be all but certain that that is what would happen. I don't need to get hung up on the reality that I can't prove what would happen in the counterfactual where I don't let go of the egg. I can, as a result of a basic life skill, act based on my confidence in what would happen if I did something different. I'm sure enough of what would happen to make decisions based on that surety.
Do you think that the market would value Apple $600 billion more today if, with other things being equal, it had an extra $300 billion in net cash on its books? I don't think so. Indeed, I'm sure that wouldn't be the case. And if that wouldn't be the case, then the share buybacks have (as compared to having continued to hold that cash) helped to increase Apple's share price. In some cases the assessment of the benefits of buybacks is a close call. In this case, it isn't a close call.
The reality about buybacks is that the appropriateness of them depends on the circumstances. In some circumstances they don't make sense. In others they do. If a company has large amounts of cash that it doesn't believe it will have other use for, and if it believes that its shares are currently significantly underpriced, then it should buy back shares. It's nearly a no-brainer.
I'm not generally a fan of corporations I own returning capital to shareholders. I think the fundamental point of equity investment is that I expect the corporations I own can or will make better use of the capital at the time than I otherwise will. But at some point - when they have so much in retained earnings which they don't think it makes sense to otherwise use - returning that capital to shareholders is what makes sense. That possibility has to always be out there or there'd be no point to investing in equities - there'd be no reason for share prices to increase.
EDITED to add: In this case, there is evidence that the share buybacks have helped Apple's share price. But there isn't, as you seem to seek, definitely proof to that effect. That's in part because there could be no such definitive proof. In order to find that, you'd need to be able to simultaneously observe two parallel universes - one in which Apple didn't do the buybacks and one in which it did, but where everything else in those universes was the same. Again, we're talking about a counterfactual. There can't be definitive proof of the sort you seem to seek. There is however, if we consider various measures, convincing indications that Apple's share buybacks have helped its share price.
Your first four sentences are in direct contradiction to each other. That’s the worth of the argument without going any further.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Of course it can't be proven, it's a counterfactual.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Of course it can't be proven, it's a counterfactual.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
You keep saying "hold on to the cash". Which one of us is saying that, and at the same time implying that's the only other option? Only you.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
ETC ETC.
Like the argument some folks use to dismiss religion I like to see verifiable evidence that a business plan I've committed to is performing.
If you aren't an investor in Apple, then I don't see why Apple buybacks keep returning as a problem for you.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Of course it can't be proven, it's a counterfactual.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
You keep saying "hold on to the cash". Which one of us is saying that, and at the same time implying that's the only other option? Only you.
I didn't imply that was the only option. To the contrary, I actually referred - in my first response to you - to there being other possibilities which the share buybacks might be compared to.
But if we're considering what the affect of the share buybacks has been, then we have to have some hypothetical base line to compare to. You asked how much of a difference the buybacks have made in the share price. The most straightforward way to consider that is to compare to Apple not having done the buybacks. What would be the differences today? How would the market value those differences? What would that translate to in terms of share price? When we do that, the math speaks for itself. The differences are easily calculable. The only point of speculation is how the market would value $300 billion in cash on Apple's balance sheet.
If you'd like to compare to other possibilities for how the cash might have been used, then we can perhaps do that. But you'd have to specify the other possibilities you'd like to consider. Those kinds of considerations would be more complicated, and for many other possibilities the comparisons likely wouldn't be as straight forward. There could be plenty of possible uses which we might identify looking backward which could have represented better uses of that money. That wouldn't, however, mean that the stock repurchases weren't the right thing to do - the right decision at the time.
You identified one other possibility - special dividends - and I addressed that. I don't think special dividends would have helped Apple's share price going forward as much as the buybacks did. Mechanistically they'd work quite differently. They wouldn't tend to inflate per-share price by concentration and they wouldn't tend to inflate per-share price, going forward, by increasing the valuation of Apple as a whole - at least not to the degree that concentration from buybacks has. Put another way, they wouldn't have been taking advantage of Apple's shares having been priced so low. That's the beauty of the buybacks which Apple did. Apple was buying something - equity in itself - which was, at the time, very undervalued. Apple was getting a good deal. In retiring those shares it passed that good deal on to its continuing shareholders. Special dividends wouldn't have rewarded ongoing AAPL ownership in the way that the buybacks did. They also would have been a poorer option because of the lack of flexibility when it comes to tax consequences.
If you want to offer other possibilities for what Apple might have done with that $300 billion, I'll consider how they might compare to the buybacks. For many such possibilities I likely won't have a definitive assessment of whether, in hindsight, they'd have been better choices. Should Apple have bought Facebook? Tesla? Should it have spent $200 billion building new facilities in New Mexico and hiring hundreds of thousands of people to trying to develop nanotechnology? I'd say probably not, but I might be persuaded otherwise. There are just too many possibilities to consider. But when it comes to the buybacks versus holding the cash, I think the math points confidently to the conclusion that the buybacks have helped Apple's share price.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Of course it can't be proven, it's a counterfactual.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
You keep saying "hold on to the cash". Which one of us is saying that, and at the same time implying that's the only other option? Only you.
I didn't imply that was the only option. To the contrary, I actually referred - in my first response to you - to there being other possibilities which the share buybacks might be compared to... If you'd like to compare to other possibilities for how the cash might have been used, then we can perhaps do that....
You identified one other possibility - special dividends - and I addressed that. I don't think special dividends would have helped Apple's share price going forward as much as the buybacks did. Mechanistically they'd work quite differently. They wouldn't tend to inflate per-share price by concentration and they wouldn't tend to inflate per-share price, going forward, by increasing the valuation of Apple as a whole - at least not to the degree that concentration from buybacks has. Put another way, they wouldn't have been taking advantage of Apple's shares having been priced so low. That's the beauty of the buybacks which Apple did. Apple was buying something - equity in itself - which was, at the time, very undervalued.
Apple bought zero equity in itself. There's no retained book value so there's no equity. That's basic accounting.
Apple repurchased 85.7 million shares in the open market during the quarter, at a cost of $17.9 billion and an average price of $208.79. That doesn't include 6.9 million shares which were delivered to Apple during the quarter to complete a $12 billion ASR agreement that Apple entered into in February. Apple's outstanding share count dropped by 88.2 million during the quarter.
Over the last 7 years Apple has repurchased 2.420 billion shares at a cost of $306.1 billon and an average price of $126.51.
The new outstanding share count, as of October 18th, is 4,443,265,000. That number actually went up a small amount from the end of the quarter, which suggests that Apple wasn't very active buying back shares during those 3 weeks.
How much of a difference has it made in the share price? Totally honest question.
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
We may have discussed this before, but...
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
Of course it can't be proven, it's a counterfactual.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
You keep saying "hold on to the cash". Which one of us is saying that, and at the same time implying that's the only other option? Only you.
I didn't imply that was the only option. To the contrary, I actually referred - in my first response to you - to there being other possibilities which the share buybacks might be compared to... If you'd like to compare to other possibilities for how the cash might have been used, then we can perhaps do that....
You identified one other possibility - special dividends - and I addressed that. I don't think special dividends would have helped Apple's share price going forward as much as the buybacks did. Mechanistically they'd work quite differently. They wouldn't tend to inflate per-share price by concentration and they wouldn't tend to inflate per-share price, going forward, by increasing the valuation of Apple as a whole - at least not to the degree that concentration from buybacks has. Put another way, they wouldn't have been taking advantage of Apple's shares having been priced so low. That's the beauty of the buybacks which Apple did. Apple was buying something - equity in itself - which was, at the time, very undervalued.
Apple bought zero equity in itself. There's no retained book value so there's no equity. That's basic accounting.
The shares are, of course, retired. But Apple is buying back equity in the company. It has, since FY 2012, bought back around 35% of the equity in the company and redistributed that equity among existing shareholders - among the remaining outstanding shares. (That's what I indicated in the portion of my post which you cut off.) That's what buying back stock and retiring it does. Each existing share now represents a greater portion of equity in the company.
Apple could, if it needed to, issue new shares. It already has authorization for 12.6 billion shares. It's an accounting issue that the shares it has repurchased have been retired - one that would be fairly easy to reverse.
As for the piece you link to: I won't comment on the validity of the arguments it makes as they don't go to the issue we've been discussing - the propriety of Apple's buybacks and their effect on the AAPL share price. I'm not arguing that all share buybacks make sense or even that they always help share prices going forward. Indeed, some buybacks are done for what I'd consider wrong reasons. But some are done for what I'd consider right reasons and, at any rate, have worked out quite well for shareholders. Apple's buyback program has, thus far, represented such a case.
I'd note that the piece you linked to only makes a passing reference to Apple's buying back stock and that reference suggests that in Apple's case the buybacks have been done for good reasons.
Comments
Could distributing the excess cash in a series of special dividends been a more effective use of the money as well as being more measurable? If the cash had been distributed per outstanding share how much would each share receive? Back of the envelope says around $40 each on top of the regular dividends. Bonus: The share price might still go up as a result, right?
I thought your earlier comments (not in this thread) had been on iPhone performance because that is all you mentioned in this thread. iPhone.
In an iPhone context (Apple's largest revenue driver by a long shot) your original comments wouldn't have been anywhere at all off the mark.
If you're talking about Apple's business as a whole though, even your original comments would have been on shaky ground.
It's important to establish the correct context.
If we are talking about Apple today and comparing to the Apple of old (Apple Computer), even if you eliminate everything from the iPhone on, the company (the computer company) would be healthier now than it was back in those days.
That aspect has been clear for years.
What really changed everything from a revenue perspective was the iPhone and the iPhone alone. Even to the point of completely overshadowing the Mac business (and even today, at its healthiest).
That's why Apple's 'health' for the last seven or eight years has been 'measured' in iPhone performance and iPhone alone.
When they issued the profit warning it wasn't really because of the Mac or services. It was mainly due to iPhone.
A sign that iPhone remains the marker that everyone (rightly or wrongly, depending on opinions) uses to represent the health of the company.
It was only recently remember that iPhone dipped below 50% of its total earnings.
My comment in this thread was on that: a nearly 10% drop in iPhone revenue YoY.
There are a few people right here in this thread, who only two or three years ago were claiming none of what has happened over those years would happen. Apple was a premium company with premium products, market share was irrevelant, the competition couldn't touch them, users wanted the 'ecosystem', iPhone was the 'king of the hill'.
And I mean iPhone. When they spoke of 'premium', 'pricing' and marketshare, they were explicitly referencing iPhone (not irrationally because the reality was the reality- Apple was the iPhone company).
Some literally laughed at the prospect of Huawei even being able to get near Apple.
Thankfully, it's all here in the forum archives.
What has changed though is that everything they said wouldn't happen, actually did and they've been dealing with that for four years now.
So, what do they do? Now, they put everything they said under the rug and look elsewhere (services, wearables, etc).
Some were jumping for joy when iPhone X became the 'most popular phone' but failed to see the bigger picture. When the year was up, sales were still flat or down. It has been exactly the same this year.
Tim Cook logically tries to put a brave face on it and spin things as best he can. Take China. Minus 2 today is better than minus 20 yesterday. It is, but it's still a minus and an almost 10% drop YoY is still reality today.
We'll see how things go for their customary blowout quarter.
Huawei wins, bigly!!! /s
As for market share, what people have said remains correct -- market share is not an indicator of health, but profit is. Apple has always been comfortable with its much smaller market share, and boss profit share. Apple does not worship at the Church of Market Share.
So what on earth are you talking about? Yes by all means, show us in the archives.
Soon, if it isn't already happening, Android OS devices will hit the same unit sales plateau, even Huawei, known for its low margins.
I’ll keep on saying it, there is no evidence that share buybacks have a real impact on share pricing. There never has been. Major investors like it because of other reasons as well as the assumed share rise, which really can’t be proven. As Warren Buffet recently said at the last Berkshire Hathaway conference when asked about Apple share buybacks (paraphrasing):
”I like it because we increase our percentage of the company without spending a single extra penny.” How does that benefit Apple? It doesn’t.
companies throw that money down the black hole, never to be seen again. Instead, they could use it for R&D, manufacturing modernization and capacity, marketing, etc. Instead, Apple has borrowed over $110 billion for this purpose. They had no long term debt before, and almost no medium term debt either.
Apple’s stock movement is a result of sales and profits, margins, estimated next quarter results, expected technology advances and, of course, general economic and political situations. There are more subtle reasons such supplier’s quarterly results, currency exchange rates and hedging, and others.
We're talking about a counterfactual, so we of course can't prove that the stock price would be lower today if Apple hadn't repurchased the shares that it repurchased over the last 7 years. I can't prove that there'd be no human life on earth today if the sun had gone supernova a year ago. But I can, based on what I know, conclude with a high degree of confidence that that would be the case.
If we want to consider what the share price of AAPL would be today if, other things being equal, it hadn't repurchased the 2.4 billion shares it did over the last 7 years, we can consider how the differences (between the current reality and that counterfactual) might effect the market's valuation of Apple. Apple would have 2.4 billion less outstanding shares and around $300 billion more in net cash on its books. If Apple had the same share price as it does now (I'll use $247.89, which is what it was a moment ago when I checked), but had 2.42 billion more shares outstanding, its market cap would be about $1.7 trillion - about $600 billion higher than it is now. So, the question we might ask is: Would the market value Apple $600 billion more if, other things being equal, Apple had $300 billion more in net cash on its books? I don't think so. I think, at best, the market would value that extra net cash at 1:1 - giving Apple a market cap of around $1.4 trillion. That would mean a share price of around $204 - $44 lower than it is now.
In simplest terms, what share repurchases tend to do is concentrate (or, put an other way, increase) future share price moves. Future increases become greater or future decreases become greater. (The mechanics of why are pretty straight forward, but I can go through them if needed.)
That's a comparison to what might be the case if Apple hadn't bought back shares, but instead continued to retain all those earnings. I don't think it can credibly be argued that the share repurchases haven't helped Apple's stock price. As for comparing the repurchases to something else Apple might have done with that money, that would of course depend on what that something else was. You ask about special dividends. I don't think that would have been as good an option because (1) it forces tax consequences on shareholders rather than leaving them free to decide whether or not to take those tax consequences at a given time and (2) because it wouldn't reward (and thus encourage) long-term ownership of Apple stock. A special dividend would result in an increase in the share price up until the special dividend date, and then the increase would disappear. There'd be no reason to value shares higher going forward based on a special dividend having been paid.
As it is, Apple has effectively been buying Apple on behalf of continuing shareholders - it is, at no cost to them, giving them more of the company and a larger share of its total value going forward. It has thus far been doing that at very attractive prices. If shareholders instead want cash now, they have the option of selling shares and getting that cash. They can sell a portion of their holdings which is equivalent to the concentration they realized from Apple buying back shares and thus end up owning the same portion of Apple which they owned before and receiving the same amount of cash as they would have gotten as a dividend payment if Apple had instead used the money to pay special dividends. Those who choose not to do that get to benefit from share price increases which might happen after the buybacks. In other words, people who think Apple should be paying dividends instead of buying back shares (or people who, for their own reasons, would just prefer that), can sell shares and end up with meaningfully the same result. Those who don't think that can continue to hold their concentrated shares.
Another way to think about it is like this: If for some reason Apple needed that $300 billion which the share buybacks have effectively cost it, it could raise that much and more by issuing new shares and selling them. Even at an average price $50 below where the stock trades today, Apple would be way ahead - it would raise far more money than it spent buying back shares, even while keeping share concentration the same (or greater) than it would have been had Apple not repurchased shares to begin with. Apple is, in effect, way ahead on its share repurchases. Apple, of course, isn't going to do that. That's the point, the money spent on buybacks is money that Apple didn't need - that it wasn't going to use for other purposes. It already spends, on other things, all the money that it thinks makes good business sense. The only real choice is special (or much larger) dividends or share buybacks, and for a number of reasons I think the latter is a much better option.
But looking at it from the perspective of management, I see it differently. Share repurchases can vary widely, year to year, based on pricing, business trends, etc. But dividends need to be steady. Increases are good, and Cook has promised yearly increases (but not by how much). But to cut a dividend is very bad. It indicates problems, and is normally avoided until the last minute. A decrease in repurchases isn’t going to be viewed with alarm as long as there aren’t major business downgrades, but a slight slip in dividend rates could sent the stock plummeting, along with confidence in the company.
so companies consider dividends that can at least be maintained until the company is on the ropes. Therefor, they try not to offer high percentages, unless they are regulated companies such as power companies whose profits are regulated by law.
cook has expressed skepticism about special dividends, which, as long as they’re not used with regularity, can be offered now and again as a way to siphon off excess cash. I don’t know why, and I don’t believe he’s stated a reason. So a “series” of smaller special dividends would be viewed as a regular dividend offered at more highly spaced out intervals. It wouldn’t solve that problem. But a large special dividend, offered at an irregular interval, spaced years apart, could do it.
and, what’s a fair value? Every single time Apple hits a number, I read that they should stop buybacks because the stock is fully valued. Each time, the stock moves to new highs. So while I’m not in favor of buybacks, which I suppose most people know by now, we don’t know what fully valued, or fair valued means in conjunction with that current price.
Some of the finest investment minds disagree about the usefulness of buybacks. For example Mr Buffett likes Apple doing so. At the same times its almost unheard of with his own company and his top lieutenant, Thomas Munger, is not fan of them at all. In general he sees them as an unwise use of corporate cash with too many CEO's simply playing follow the leader.
Like the argument some folks use to dismiss religion I like to see verifiable evidence that a business plan I've committed to is performing.
"Hope springs eternal" or "Diamonds (or Gold) are forever". I'm more a fan of the second one. You're good with the first and that's OK.
I disagree, I don’t believe your argument to be credible. It’s no more than conjecture. I have no doubt that shares pop right after a repurchase program is announced. But all evidence shows it to be small, and short lived. I doubt anyone here would agree that if Apple purchased 20% of their shares at once, that the stock would suddenly move to $300. And stay there. It would move a bit, maybe $10, but market forces would wipe it out.
there is simply no way to prove, or even statistically show, that share repurchases move directly in line with stock prices. It’s never been proven. And like so many financial theories lack of evidence doesn’t seem to matter for those who believe in them, unfortunately.
For my purposes, I know that the buybacks have helped to increase the share price. The numbers don't leave much room to credibly argue to the contrary. It's just that, you can't prove such counterfactuals. You can be sure, within the limits of reasonableness; but you can't definitely prove them. That's just something that we, as humans, accept. I can't prove that, if I were to let go of this egg, it would fall to the pavement 5 feet below and crack. The only way I can prove that is to let go of this egg. But, based on what I know about, e.g., gravity and the physical properties of eggs, I can be all but certain that that is what would happen. I don't need to get hung up on the reality that I can't prove what would happen in the counterfactual where I don't let go of the egg. I can, as a result of a basic life skill, act based on my confidence in what would happen if I did something different. I'm sure enough of what would happen to make decisions based on that surety.
Do you think that the market would value Apple $600 billion more today if, with other things being equal, it had an extra $300 billion in net cash on its books? I don't think so. Indeed, I'm sure that wouldn't be the case. And if that wouldn't be the case, then the share buybacks have (as compared to having continued to hold that cash) helped to increase Apple's share price. In some cases the assessment of the benefits of buybacks is a close call. In this case, it isn't a close call.
The reality about buybacks is that the appropriateness of them depends on the circumstances. In some circumstances they don't make sense. In others they do. If a company has large amounts of cash that it doesn't believe it will have other use for, and if it believes that its shares are currently significantly underpriced, then it should buy back shares. It's nearly a no-brainer.
I'm not generally a fan of corporations I own returning capital to shareholders. I think the fundamental point of equity investment is that I expect the corporations I own can or will make better use of the capital at the time than I otherwise will. But at some point - when they have so much in retained earnings which they don't think it makes sense to otherwise use - returning that capital to shareholders is what makes sense. That possibility has to always be out there or there'd be no point to investing in equities - there'd be no reason for share prices to increase.
EDITED to add: In this case, there is evidence that the share buybacks have helped Apple's share price. But there isn't, as you seem to seek, definitely proof to that effect. That's in part because there could be no such definitive proof. In order to find that, you'd need to be able to simultaneously observe two parallel universes - one in which Apple didn't do the buybacks and one in which it did, but where everything else in those universes was the same. Again, we're talking about a counterfactual. There can't be definitive proof of the sort you seem to seek. There is however, if we consider various measures, convincing indications that Apple's share buybacks have helped its share price.
But I'd ask... By how much more do you think the market would value Apple today if Apple, with other things being the same, had an additional $300 billion in net cash on its books? That's the most straightforward way to get a fair idea of the overall effect of Apple having repurchased shares rather than it having just continued to hold that money.
If you aren't an investor in Apple, then I don't see why Apple buybacks keep returning as a problem for you.
But if we're considering what the affect of the share buybacks has been, then we have to have some hypothetical base line to compare to. You asked how much of a difference the buybacks have made in the share price. The most straightforward way to consider that is to compare to Apple not having done the buybacks. What would be the differences today? How would the market value those differences? What would that translate to in terms of share price? When we do that, the math speaks for itself. The differences are easily calculable. The only point of speculation is how the market would value $300 billion in cash on Apple's balance sheet.
If you'd like to compare to other possibilities for how the cash might have been used, then we can perhaps do that. But you'd have to specify the other possibilities you'd like to consider. Those kinds of considerations would be more complicated, and for many other possibilities the comparisons likely wouldn't be as straight forward. There could be plenty of possible uses which we might identify looking backward which could have represented better uses of that money. That wouldn't, however, mean that the stock repurchases weren't the right thing to do - the right decision at the time.
You identified one other possibility - special dividends - and I addressed that. I don't think special dividends would have helped Apple's share price going forward as much as the buybacks did. Mechanistically they'd work quite differently. They wouldn't tend to inflate per-share price by concentration and they wouldn't tend to inflate per-share price, going forward, by increasing the valuation of Apple as a whole - at least not to the degree that concentration from buybacks has. Put another way, they wouldn't have been taking advantage of Apple's shares having been priced so low. That's the beauty of the buybacks which Apple did. Apple was buying something - equity in itself - which was, at the time, very undervalued. Apple was getting a good deal. In retiring those shares it passed that good deal on to its continuing shareholders. Special dividends wouldn't have rewarded ongoing AAPL ownership in the way that the buybacks did. They also would have been a poorer option because of the lack of flexibility when it comes to tax consequences.
If you want to offer other possibilities for what Apple might have done with that $300 billion, I'll consider how they might compare to the buybacks. For many such possibilities I likely won't have a definitive assessment of whether, in hindsight, they'd have been better choices. Should Apple have bought Facebook? Tesla? Should it have spent $200 billion building new facilities in New Mexico and hiring hundreds of thousands of people to trying to develop nanotechnology? I'd say probably not, but I might be persuaded otherwise. There are just too many possibilities to consider. But when it comes to the buybacks versus holding the cash, I think the math points confidently to the conclusion that the buybacks have helped Apple's share price.
EDIT: This is an interesting and very recent article that's perfectly aligned to our discussion on the merits of stock buybacks IMHO
https://www.theatlantic.com/magazine/archive/2019/08/the-stock-buyback-swindle/592774/
Apple could, if it needed to, issue new shares. It already has authorization for 12.6 billion shares. It's an accounting issue that the shares it has repurchased have been retired - one that would be fairly easy to reverse.
As for the piece you link to: I won't comment on the validity of the arguments it makes as they don't go to the issue we've been discussing - the propriety of Apple's buybacks and their effect on the AAPL share price. I'm not arguing that all share buybacks make sense or even that they always help share prices going forward. Indeed, some buybacks are done for what I'd consider wrong reasons. But some are done for what I'd consider right reasons and, at any rate, have worked out quite well for shareholders. Apple's buyback program has, thus far, represented such a case.
I'd note that the piece you linked to only makes a passing reference to Apple's buying back stock and that reference suggests that in Apple's case the buybacks have been done for good reasons.