Apple's Jobs pays $295M in taxes on 10M vested shares

Posted:
in General Discussion edited January 2014
Apple Computer chief executive Steve Jobs this month used over 4.5M of the 10M restricted shares owed to him by the company to pay income and other employment taxes applicable to those shares, AppleInsider has discovered.



He did not sell any of his stake in the company.



In order to meet his tax obligations on the 10M restricted shares, which vested this month, Jobs elected to net-share settle -- essentially allowing Apple to withhold and pay to authorities the portion of the 10M shares that would meet his tax payment requirements.



On March 19 -- the date of the transaction -- this portion amounted to 4,573,553 shares at $64.66 a share, or a whopping $295.7M tax payment. Apple then turned over to Jobs the remaining 5,426,451 shares, which at the close of the market on Friday were worth about $325.4M. The value of the withheld shares ($295.7M) will be turned over to the appropriate tax authorities.



As part of the net-share settlement, Apple will essentially sell, repurchase and then retire the 4,573,553 shares it used to pay Jobs' taxes. These transactions will not represent expenses to the company, but will be accounted for as reductions to cash with corresponding reductions to shareholders' equity.



Therefore, the net-share settlement will have the effect of a share repurchase by the company -- essentially Apple reinvesting in itself, which will reduce the number of outstanding Apple shares on the market.



Apple gave Jobs the 10 million shares of restricted stock back in 2003, in exchange for worthless options on a split-adjusted 55 million shares. The options were "worthless" because the shares had dropped 80 percent in the preceding three years amid a worldwide economic slowdown that crimped computer purchases.



In addition to the 5,426,451 shares Jobs now retains, he also holds 120,000 fully vested options received in 1997 under the director stock option plan.

Comments

  • Reply 1 of 11
    toweltowel Posts: 1,479member
    Well that explains the share "sale" we were wondering about. Nice story, and good job making the arcane bookkeeping comprehensible for the rest of us.
  • Reply 2 of 11
    irelandireland Posts: 17,590member
    No reason to worry people Jobs is not dying, and he didn't sell his shares because he predicted apple would fall to its death!



    I bought more shares recently, now is a buy opportunity!



    If you have money to spare, and you dont buy now, in my opinion dont bother in the investment game!
  • Reply 3 of 11
    jimzipjimzip Posts: 444member
    Zuh?



    Jimzip
  • Reply 4 of 11
    groveratgroverat Posts: 10,872member
    Not that Jobs is hurting, but man that is a kick in the balls.
  • Reply 5 of 11
    jimzipjimzip Posts: 444member
    Quote:

    Originally posted by groverat

    Not that Jobs is hurting, but man that is a kick in the balls.



    I'd imagine so.. $295M isn't exactly petty cash for anyone..



    Jimzip
  • Reply 6 of 11
    eaieai Posts: 417member
    How do you know they were sold for tax purposes?
  • Reply 7 of 11
    Quote:

    Originally posted by eAi

    How do you know they were sold for tax purposes?



    Because this is what the Apple investor relations department

    will tell you, as they did me, if you call to confirm -- apparently

    the share settlement provisions are all in the 10Q, not

    the SEC Form 4 made public last week.



    As for taxes, they verified that taxes started accruing on the

    whole 10M wad the day they vested this month. Of course,

    if you already have funds to put aside for the 35% fed and 10.3% state

    rates, the money *can* be used for other purposes.

    It's common for zecks to sell some shares to pay just enough taxes

    to keep the others going at the more favorable capital gains rate.



    It's rather like the "same-day-sale" of traditional vested stock options

    where for NQSO grants, the tax is on ordinary income. ISO grants,

    where the tax is the more favorable 15% capital gains rate,

    are rarer, and less used these days.



    With Mr. Jobs' stock grant, it was essentially a gift with zero-cost basis

    several years ago. If it had stayed in the form of options, he could

    have kept them indefinitely without owing taxes until exercised.

    The new wave is stock grants, with tax due upon vesting.



    Jobs probably wanted to keep his shares forever, as he could

    with PIXR/DIS without owing taxes.
  • Reply 8 of 11
    Don't worry, he will get all that money back when the stock goes to $100 or more per share before the end of the year. 8)



    However it does suck that they couldn't structure it so that he would only pay 20% capital gains taxes. It looks like he is paying income tax on the amount.
  • Reply 9 of 11
    irelandireland Posts: 17,590member
    I suppose everyone has to pay taxes!

    He's still a rich man, but he deserves it. In a way he's a visionary. More power to him!
  • Reply 10 of 11
    slugheadslughead Posts: 1,169member
    I don't understand.. he still gave up 45% of his shares in Apple. Was it just because he owed tax money on the whole of his shares and he didn't want to pay out of pocket?



    He owed money, so he used his Apple shares.. big deal. The story should've read "IRS takes 45% of Jobs' stake in Apple."



    I donno I'm drunk and posting again.
  • Reply 11 of 11
    Thanks for writing such a clear explanation, I need as much padding when it comes to finance stories as I can get. This story actually makes it look like there are going to be less apple stock floating around, or is that wrong?



    I'm still a uni student so I don't have to pay alot of tax, but I have to pay back my student loan soon enough though.



    Nicko
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