Apple issues $14B worth of bonds to fund buybacks, corporate initiatives

Posted:
in General Discussion
Apple on Monday officially issued $14 billion worth of bonds, tapping the market to fund corporate operations like share buybacks and dividends to shareholders.

Credit: SEC
Credit: SEC


News of Apple's plan to sell bonds first surfaced at the beginning of February. On Feb. 8, the company made the issuance official, announcing that it would issue debt in five parts.

Apple is issuing $2.5 billion worth of 0.7% bonds that mature in 2026, $2.75 billion worth of 1.65% bonds that mature in 2031, $1.5 billion worth of 2.375% bonds that mature in 2041, $3 billion worth of 2.65% bonds that mature in 2051, and $1.75 billion worth of 2.8% bonds that mature in 2061. Interest will be paid on the note semi-annually in February and August each year.

The Cupertino company plans to use the proceeds for general corporate purposes, including stock buybacks, paying dividends to shareholders, working capital, capital expenditures, repayment of debt, or acquisitions.

Today's debt sale also marks the third time that Apple has tapped the market since May 2020. Apple issued bond sales of $8 billion in May, and another $5.5 billion bond sale in August.
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Comments

  • Reply 1 of 22
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
  • Reply 2 of 22
    flydogflydog Posts: 1,005member
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
    https://money.cnn.com/quote/shareholders/shareholders.html?symb=AAPL&subView=institutional
  • Reply 3 of 22
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
    Institutions own >60% of Apple. This is similar for most large, publicly traded companies in the US. 

    That said, Apple has a greater proportion of retail ownership than most other large companies. See the breakdown here: https://eresearch.fidelity.com/eresearch/evaluate/fundamentals/ownership.jhtml?stockspage=ownership&symbols=aapl

    (Bondholders would not be considered owners). 


    muthuk_vanalingammike1
  • Reply 4 of 22
    flydog said:
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
    https://money.cnn.com/quote/shareholders/shareholders.html?symb=AAPL&subView=institutional
    Thanks for that link.  "Institutional investors hold a majority ownership of AAPL through the 59.15% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Telecommunications Equipment industry."

    Although I don't understand the numbers shown:
    Other institutional31.15%
    Mutual fund holders28.00%
    Individual stakeholders0.32%

    Is that supposed to be 32% for individual stakeholders?  Even so where is the remaining 8% or so?
  • Reply 5 of 22
    crowleycrowley Posts: 8,741member
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
    What does the size of the individual have to do with anything?
    mike1randominternetperson
  • Reply 6 of 22
    byronlbyronl Posts: 153member
    Hah? Can someone please explain what does this all mean for dummies?
  • Reply 7 of 22
    GeorgeBMacGeorgeBMac Posts: 10,270member
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?

    It means that, instead of reinvesting profits into growing and expanding their business, that the owners are taking their profits out of that business.    But, even worse, the company is borrowing the money that those owners are sucking out of corporate coffers.

    We know that corporations must constantly be growing and moving or they die -- and that requires the wise use of capital.   It is perhaps why less than 20% of the U.S. Fortune 500 companies from 50 years ago are still Fortune 500 Companies today -- financial managers taking the profits and sucking the life blood out of the corporations they control.
    edited February 9 danox
  • Reply 8 of 22
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?
    Ignore GeorgeBMac on this topic. He's a wannabe iconoclast CFO.

    All this means is that Apple is taking advantage of historically low interest rates to borrow the money to fund promised dividends and planned stock buy backs.  Corporations borrow money by issuing long-term bonds.  For example the article mentions that part of the offering is a set of "$1.75 billion worth of 2.8% bonds that mature in 2061."  That just means that major investors (like mutual funds) are buying promissory notes (bonds) from Apple that will pay 2.8% interest (twice a year) for the next 40 years (at which time Apple gives them the original money back).  If you look at a mutual fund prospective (for a fund that includes more than just equity (stocks), you'll see bonds like this listed.  These bonds aren't really available to the individual investor (except as part of these mutual funds).

    Also, the fact that Apple gets such low interest rates reflects "the markets" confidence that Apple will be around and financial healthy for the next 40 years to be able to make those payments.  If a company with an uncertain future tried to raise money this way, they would have to pay much higher interest to make up for the default risk.

    Why would Apple do this--taking on debt when they have billions and billions in the bank (actually in other investments, not sitting in a bank account)?  Part of it is could be for tax benefits, but the main reason is because Apple believes it can make a profit doing this. They can borrow money at a low interest rate (2.8% and below) while making a higher rate of return on their existing cash.
  • Reply 9 of 22
    GeorgeBMacGeorgeBMac Posts: 10,270member
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?
    Ignore GeorgeBMac on this topic. He's a wannabe iconoclast CFO.

    All this means is that Apple is taking advantage of historically low interest rates to borrow the money to fund promised dividends and planned stock buy backs.  Corporations borrow money by issuing long-term bonds.  For example the article mentions that part of the offering is a set of "$1.75 billion worth of 2.8% bonds that mature in 2061."  That just means that major investors (like mutual funds) are buying promissory notes (bonds) from Apple that will pay 2.8% interest (twice a year) for the next 40 years (at which time Apple gives them the original money back).  If you look at a mutual fund prospective (for a fund that includes more than just equity (stocks), you'll see bonds like this listed.  These bonds aren't really available to the individual investor (except as part of these mutual funds).

    Also, the fact that Apple gets such low interest rates reflects "the markets" confidence that Apple will be around and financial healthy for the next 40 years to be able to make those payments.  If a company with an uncertain future tried to raise money this way, they would have to pay much higher interest to make up for the default risk.

    Why would Apple do this--taking on debt when they have billions and billions in the bank (actually in other investments, not sitting in a bank account)?  Part of it is could be for tax benefits, but the main reason is because Apple believes it can make a profit doing this. They can borrow money at a low interest rate (2.8% and below) while making a higher rate of return on their existing cash.

    LOL.... Sorry, but what it means is Apple is undermining the business to keep childish, greedy shareholders who don't give a damn about anything but today's stock price happy.

    There's a reason why American industry is drying up while Chinese industry is steadily growing:   the Chinese invest in their industries instead of raping them. 

    I saw that playing out in 70's and 80's while working in the steel industry:   Japan was using modern technology to produce higher quality steel cheaper than American mills could match with their 100 year old technology.   So, what did U.S. Steel (and others do?)  Instead of investing in their business, they bought an oil company to keep their stock holders happy.  Today, the American steel industry is shell of what it once was,

    There's a reason why 80% of the Fortune 500 companies of the 1970's are on that list anymore.   They failed to invest in themselves.
    edited February 9
  • Reply 10 of 22
    flydogflydog Posts: 1,005member
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?

    It means that, instead of reinvesting profits into growing and expanding their business, that the owners are taking their profits out of that business.    But, even worse, the company is borrowing the money that those owners are sucking out of corporate coffers.

    We know that corporations must constantly be growing and moving or they die -- and that requires the wise use of capital.   It is perhaps why less than 20% of the U.S. Fortune 500 companies from 50 years ago are still Fortune 500 Companies today -- financial managers taking the profits and sucking the life blood out of the corporations they control.
    Your analysis is overly simplistic and just plain wrong. 

    It doesn't mean that at all. Dividends are how profits are distributed to shareholders. While companies use bond proceeds for dividends (and Apple does do this), the sale of bonds is generally done because it is cheaper than using cash (e.g., repatriating cash would require paying taxes).   That is a "wise use of capital."

    Moreover, the fact that the makeup of the Forture 500 changes over time doesn’t mean that " financial managers [are] sucking the life blood out of the corporations they control."  The makeup of the Fortune 500 changes for many reasons, among them the emergence of new industries and new companies that outpace their competitors.  It would be quite absurd if the makeup of the Fortune 500 never changed since it would point to a lack of competition and innovation. 








    randominternetperson
  • Reply 11 of 22
    22july201322july2013 Posts: 2,511member
    I'm glad my post spawned this discussion. Some of the posts were interesting. 

    I think most people here realize that even when a corporation or institutional investor owns some stock in a company, they are really just acting as middlemen for the little guy who owns their stock, whether directly or indirectly (and often unknowingly) through instruments like mutual funds.

    All companies, whether trade in the stock market or not, are all owned by individuals. Any assets owned by a company is ultimately owned by individuals.

    One thing that hasn't been discussed yet is the nationality of the individuals who own Apple stock. Is this untrackable or trackable?
  • Reply 12 of 22
    crowleycrowley Posts: 8,741member
    I'm glad my post spawned this discussion. Some of the posts were interesting. 

    I think most people here realize that even when a corporation or institutional investor owns some stock in a company, they are really just acting as middlemen for the little guy who owns their stock, whether directly or indirectly (and often unknowingly) through instruments like mutual funds.

    All companies, whether trade in the stock market or not, are all owned by individuals. Any assets owned by a company is ultimately owned by individuals.

    One thing that hasn't been discussed yet is the nationality of the individuals who own Apple stock. Is this untrackable or trackable?
    Institutional investors are often pension funds or money held in managed trusts.  They aren't "owned" by individuals in any meaningful sense, and that's not a pertinent  observation.

    Do you have any purpose behind these rambling questions?   What does it mattter what the nationality of investors in a publically traded company are?
    muthuk_vanalingamGeorgeBMac
  • Reply 13 of 22
    danoxdanox Posts: 599member
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?
    Ignore GeorgeBMac on this topic. He's a wannabe iconoclast CFO.

    All this means is that Apple is taking advantage of historically low interest rates to borrow the money to fund promised dividends and planned stock buy backs.  Corporations borrow money by issuing long-term bonds.  For example the article mentions that part of the offering is a set of "$1.75 billion worth of 2.8% bonds that mature in 2061."  That just means that major investors (like mutual funds) are buying promissory notes (bonds) from Apple that will pay 2.8% interest (twice a year) for the next 40 years (at which time Apple gives them the original money back).  If you look at a mutual fund prospective (for a fund that includes more than just equity (stocks), you'll see bonds like this listed.  These bonds aren't really available to the individual investor (except as part of these mutual funds).

    Also, the fact that Apple gets such low interest rates reflects "the markets" confidence that Apple will be around and financial healthy for the next 40 years to be able to make those payments.  If a company with an uncertain future tried to raise money this way, they would have to pay much higher interest to make up for the default risk.

    Why would Apple do this--taking on debt when they have billions and billions in the bank (actually in other investments, not sitting in a bank account)?  Part of it is could be for tax benefits, but the main reason is because Apple believes it can make a profit doing this. They can borrow money at a low interest rate (2.8% and below) while making a higher rate of return on their existing cash.

    George is right and you are wrong, Apple and most American companies need to start thinking like Norway and less like the UK when it comes to long term money management, spending like a drunken sailor doesn’t work, you would think that the pandemic would have galvanized more people and companies spend and invest wisely.

    Taking on debt when you don’t need to is a fools game, saving, living within your means and investing is the only way to go, long Apple....
    GeorgeBMac
  • Reply 14 of 22
    danoxdanox Posts: 599member

    Wiseman said:
    Cheap money why not? Cheaper than paying crazy California taxes , smartest company around
    Crazy property taxes that would be Texas....Hmm
  • Reply 15 of 22
    danoxdanox Posts: 599member

    flydog said:
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?

    It means that, instead of reinvesting profits into growing and expanding their business, that the owners are taking their profits out of that business.    But, even worse, the company is borrowing the money that those owners are sucking out of corporate coffers.

    We know that corporations must constantly be growing and moving or they die -- and that requires the wise use of capital.   It is perhaps why less than 20% of the U.S. Fortune 500 companies from 50 years ago are still Fortune 500 Companies today -- financial managers taking the profits and sucking the life blood out of the corporations they control.
    Your analysis is overly simplistic and just plain wrong. 

    It doesn't mean that at all. Dividends are how profits are distributed to shareholders. While companies use bond proceeds for dividends (and Apple does do this), the sale of bonds is generally done because it is cheaper than using cash (e.g., repatriating cash would require paying taxes).   That is a "wise use of capital."

    Moreover, the fact that the makeup of the Forture 500 changes over time doesn’t mean that " financial managers [are] sucking the life blood out of the corporations they control."  The makeup of the Fortune 500 changes for many reasons, among them the emergence of new industries and new companies that outpace their competitors.  It would be quite absurd if the makeup of the Fortune 500 never changed since it would point to a lack of competition and innovation. 








    IBM, Xerox, Intel, HP, and Kodak, say differently all are on the long slow decline, MBA’S and bean counters are eating those companies out from the inside.
  • Reply 16 of 22
    danox said:
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?
    Ignore GeorgeBMac on this topic. He's a wannabe iconoclast CFO.

    All this means is that Apple is taking advantage of historically low interest rates to borrow the money to fund promised dividends and planned stock buy backs.  Corporations borrow money by issuing long-term bonds.  For example the article mentions that part of the offering is a set of "$1.75 billion worth of 2.8% bonds that mature in 2061."  That just means that major investors (like mutual funds) are buying promissory notes (bonds) from Apple that will pay 2.8% interest (twice a year) for the next 40 years (at which time Apple gives them the original money back).  If you look at a mutual fund prospective (for a fund that includes more than just equity (stocks), you'll see bonds like this listed.  These bonds aren't really available to the individual investor (except as part of these mutual funds).

    Also, the fact that Apple gets such low interest rates reflects "the markets" confidence that Apple will be around and financial healthy for the next 40 years to be able to make those payments.  If a company with an uncertain future tried to raise money this way, they would have to pay much higher interest to make up for the default risk.

    Why would Apple do this--taking on debt when they have billions and billions in the bank (actually in other investments, not sitting in a bank account)?  Part of it is could be for tax benefits, but the main reason is because Apple believes it can make a profit doing this. They can borrow money at a low interest rate (2.8% and below) while making a higher rate of return on their existing cash.

    George is right and you are wrong, Apple and most American companies need to start thinking like Norway and less like the UK when it comes to long term money management, spending like a drunken sailor doesn’t work, you would think that the pandemic would have galvanized more people and companies spend and invest wisely.

    Taking on debt when you don’t need to is a fools game, saving, living within your means and investing is the only way to go, long Apple....
    Funny.  My post was an answer to a question about what this transaction was.  I don't think anything about my answer was wrong, but I'm open to being corrected.

    BTW "Tim may not be able to design a product like Steve," said Berkshire Hathaway's Warren Buffet, "but Tim understands the world to a degree that very, very few CEOs I've met over the past 60 years could match."

    I don't know about you, but I give Buffet's words more credibility that randos on the internet.
  • Reply 17 of 22
    danox said:

    flydog said:
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?

    It means that, instead of reinvesting profits into growing and expanding their business, that the owners are taking their profits out of that business.    But, even worse, the company is borrowing the money that those owners are sucking out of corporate coffers.

    We know that corporations must constantly be growing and moving or they die -- and that requires the wise use of capital.   It is perhaps why less than 20% of the U.S. Fortune 500 companies from 50 years ago are still Fortune 500 Companies today -- financial managers taking the profits and sucking the life blood out of the corporations they control.
    Your analysis is overly simplistic and just plain wrong. 

    It doesn't mean that at all. Dividends are how profits are distributed to shareholders. While companies use bond proceeds for dividends (and Apple does do this), the sale of bonds is generally done because it is cheaper than using cash (e.g., repatriating cash would require paying taxes).   That is a "wise use of capital."

    Moreover, the fact that the makeup of the Forture 500 changes over time doesn’t mean that " financial managers [are] sucking the life blood out of the corporations they control."  The makeup of the Fortune 500 changes for many reasons, among them the emergence of new industries and new companies that outpace their competitors.  It would be quite absurd if the makeup of the Fortune 500 never changed since it would point to a lack of competition and innovation. 








    IBM, Xerox, Intel, HP, and Kodak, say differently all are on the long slow decline, MBA’S and bean counters are eating those companies out from the inside.
    Kodak and Xerox are perfect examples of what flydog is talking about.  They didn't adapt fast enough to real changes in their markets (film photography and copiers).  Nothing to do with their money market habits.  Apple, on the other hand, in investing billions in R&D.  I'm not worried that they are resting on their laurels or "borrowing the money that those owners are sucking out of corporate coffers."  Those coffers are richer than ever.
    GeorgeBMac
  • Reply 18 of 22
    blastdoorblastdoor Posts: 2,437member
    crowley said:
    I would enjoy seeing a breakdown of who actually owns Apple. My guess is that the vast majority of it is owned by very small individual investors through brokerage houses and mutual funds. I suppose bond holders could also be considered owners. Clearly some corporations are holders of Apple stock, but then you would have to examine who the owners of those corporations are, and once again you will usually end up with small individuals. 
    What does the size of the individual have to do with anything?
    I’ve definitely put on weight during COVID 
    GeorgeBMac
  • Reply 19 of 22
    GeorgeBMacGeorgeBMac Posts: 10,270member
    flydog said:
    byronl said:
    Hah? Can someone please explain what does this all mean for dummies?

    It means that, instead of reinvesting profits into growing and expanding their business, that the owners are taking their profits out of that business.    But, even worse, the company is borrowing the money that those owners are sucking out of corporate coffers.

    We know that corporations must constantly be growing and moving or they die -- and that requires the wise use of capital.   It is perhaps why less than 20% of the U.S. Fortune 500 companies from 50 years ago are still Fortune 500 Companies today -- financial managers taking the profits and sucking the life blood out of the corporations they control.
    Your analysis is overly simplistic and just plain wrong. 

    It doesn't mean that at all. Dividends are how profits are distributed to shareholders. While companies use bond proceeds for dividends (and Apple does do this), the sale of bonds is generally done because it is cheaper than using cash (e.g., repatriating cash would require paying taxes).   That is a "wise use of capital."

    Moreover, the fact that the makeup of the Forture 500 changes over time doesn’t mean that " financial managers [are] sucking the life blood out of the corporations they control."  The makeup of the Fortune 500 changes for many reasons, among them the emergence of new industries and new companies that outpace their competitors.  It would be quite absurd if the makeup of the Fortune 500 never changed since it would point to a lack of competition and innovation. 









    Yes, dividends -- which historically have been a fair return to investors -- are legitimate.   But that's not what is going on here (and with other corporations).   Rather it is means to prop up a stock price.  And even if it were a legitimate dividend (which it isn't), having to borrow in order to pay for it makes it illegitimate.
  • Reply 20 of 22
    GeorgeBMacGeorgeBMac Posts: 10,270member
    I'm glad my post spawned this discussion. Some of the posts were interesting. 

    I think most people here realize that even when a corporation or institutional investor owns some stock in a company, they are really just acting as middlemen for the little guy who owns their stock, whether directly or indirectly (and often unknowingly) through instruments like mutual funds.

    All companies, whether trade in the stock market or not, are all owned by individuals. Any assets owned by a company is ultimately owned by individuals.

    One thing that hasn't been discussed yet is the nationality of the individuals who own Apple stock. Is this untrackable or trackable?

    Yes, that's technically true.   But there is a huge difference between stock holders only looking for an immediate return on their money (hopefully as large as possible) versus an owner/operator or entrepreneur looking to build and operate an organization over the long term.   And, there is an even bigger difference between that own/operator and owners who own it through a passive index fund or ETF -- it is very likely that they don't even know that they own a piece of that company because they are looking strictly at short term returns.

    An analogy might be the bank management looking only at their quarterly bonuses who triggered the 2008 crash:   formerly those investment houses had been run by owner/operators with skin in the game -- the managers had little or none.  So they piled risk on top of risk on top of risk because they had nothing to lose and a bigger bonus to gain.
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