My post above (#19) should have read: ".. institute a change in a company’s capital structure and hence, lower its cost of capital (I.e., the discount rate at which its cash flows are valued) thereby, all else equal, increasing the value of the firm.
(I noticed this past the time allowed to do edits).
Apple currently has ~$110B in debt (incl commercial paper). This new issue will make it’s total debt ~$125B. That’s still a trivial 5.5% of the company’s market value of equity. It’s like a person with a million dollar net worth having $55,000 in debt.
Apple’s cash (including all of its marketable securities), at ~$190B, still dwarfs its total debt.
This board has had many discussions about debt over the years. Often I've seen forum members claim that having debt of any kind means you're not responsible with your money when I'd easily argue that borrowing when interest rates are incredibly low is the most financially prudent thing you can do, even if feels uncomfortable having to pay something back that you can easily afford to pay for outright.
Borrowing money to give it away is not responsible corporate management.
Responsible corporations manage money responsibly and invest in themselves. Stock buybacks do neither. And, borrowing money for stock buybacks is even less responsible.
Because Apple has enough profit and cash from operations to cover it up does not make it responsible corporate management.
Borrowing money - to include borrowing it to facilitate stock buybacks - can be irresponsible. But in Apple's case the buybacks have been anything but irresponsible. Apple's buyback program over the last decade or so has been one of the most successful financial moves in the history of equity investment.
....
It would be -- if Apple was a stock broker. But, its not. Buying stock is a money laundering scheme to funnel assets to others and takes money away from the business that could be used to grow that business.
You realize that Apple had gross revenue of 110 billion dollars last quarter, right? How to you expect them to grow fast enough to use all this cash? They could buy a new Fortune 500 company every quarter, I suppose and become less efficient and profitable with each acquisition. Sounds like a terrible idea to me.
You realize that Apple's revenue is only sales not cash flow? And even if it was, giving it away in excess amounts -- and even borrowing to give away more -- does nothing to grow or improve a company and instead strips of assets?
It would be -- if Apple was a stock broker. But, its not. Buying stock is a money laundering scheme to funnel assets to others and takes money away from the business that could be used to grow that business.
And Apple are famously short of cash and haven't grown in years.
Not relevant. Especially when they are borrowing that cash.
I wonder how all those in favor of Apple borrowing to give cash away to stock holders would feel if, instead, they borrowed to give away to say: Black Lives Matter or Proud Boys?
THIS is why a responsible organization does not give away its cash (to anybody) for no other reason than to give away its cash:
From the new/upcoming head of Amazon -- a guy responsible for Amazon's dominance in cloud computing: "... Jassy noted just 83 of the Fortune 500 companies
from 1970 are still on the list -- and only half are on the list from
2000.
“It’s
really hard to build a business that sustains for a long period of
time,” Jassy said, adding, to stay on the list, he said, “you are going
to have to reinvent yourself” and often more than once."
The world, the universe, is constantly moving forward. An organization either moves forward with it (hopefully ahead of it) or it dies. And, as JP Morgan would affirm capital is a very necessary ingredient in doing that -- and squandering that capital squanders the future of that organization.
One of the reasons why China will soon overtake the U.S. as the world's greatest economy is that their corporations do not squander their cash. They reinvest it in themselves. Huawei not only invests more in R&D than Apple but it invests much of its profits back into its primary asset: it's employees -- the asset that drives a corporation for good or for bad -- the ones who stay in the lab till 10:00 at night in an obsessive drive to create the best product possible.
America, too often, seems to believe that it is the greatest because, well, it is the greatest. That circular logic takes you out of the running to become an "also ran".
Comments
(I noticed this past the time allowed to do edits).
You realize that Apple's revenue is only sales not cash flow? And even if it was, giving it away in excess amounts -- and even borrowing to give away more -- does nothing to grow or improve a company and instead strips of assets?
"... Jassy noted just 83 of the Fortune 500 companies from 1970 are still on the list -- and only half are on the list from 2000.
“It’s really hard to build a business that sustains for a long period of time,” Jassy said, adding, to stay on the list, he said, “you are going to have to reinvent yourself” and often more than once."
The world, the universe, is constantly moving forward. An organization either moves forward with it (hopefully ahead of it) or it dies.
And, as JP Morgan would affirm capital is a very necessary ingredient in doing that -- and squandering that capital squanders the future of that organization.
One of the reasons why China will soon overtake the U.S. as the world's greatest economy is that their corporations do not squander their cash. They reinvest it in themselves. Huawei not only invests more in R&D than Apple but it invests much of its profits back into its primary asset: it's employees -- the asset that drives a corporation for good or for bad -- the ones who stay in the lab till 10:00 at night in an obsessive drive to create the best product possible.
America, too often, seems to believe that it is the greatest because, well, it is the greatest. That circular logic takes you out of the running to become an "also ran".