WTF. You are wrong. YOu do own a larger % of the company. Those shares are RETIRED!!!! Jesus you guys know NOTHING about finance. Just read and learn and stop spouting out ridiculous statements.
"Your shares after a share buyback represent ownership of a greater fraction of the company, since in effect the company is buying out other shareholders on your behalf."
Shares aren't always retired. During a buyback a company is increasing its ownership of its own shares, they're investing in themselves. With your method it would make it easy for someone to become a majority shareholder.
I was at the Apple store and was told about the ability of the retail employees to buy Apple stock at a 15% discount at the lowest price during the quarter! up to 10% of their income. Where do these shares come from?
Should each investor have to promise to hold the stock for 10 years to be an investor? Why not buy stock in Berkshire Hanover and have Warren Buffent be your CFO?
Name one entrepreneur on the board of Apple, or in top management. Jeff Bezos spent 8 years on Wall Street And Google has the founders and a VC on the board. Put Carl on the board. What is the downside?
When a company buys back stock it increases shareholder value because each share now has a larger stake or ownership in the company. It is NOT a short-term strategy. Lets say a company has 100 shares outstanding. You own 20 shares. So you own 20% of the company. If the company buys back 50 of the shares you now own 40% of the company. The same thing is happening with Apple. Apple has bought back about 4% of its total shares.
The average stock holder owns <0.00001% of Apple. Even if Apple retires half its stock, the average share holder will still have <0.00001%. Basically this enriches Crazy Carl and hedge funds.
I was at the Apple store and was told about the ability of the retail employees to buy Apple stock at a 15% discount at the lowest price during the quarter! up to 10% of their income. Where do these shares come from?
There are buyers and sellers all the time. Employees pay 85%, Apple pays the 15%.
Name one entrepreneur on the board of Apple, or in top management. Jeff Bezos spent 8 years on Wall Street
And Google has the founders and a VC on the board. Put Carl on the board. What is the downside?
Flabby's at it again. Carl will suck Apple dry and leave nothing behind. He's the crystalline entity of investors.
You entirely missed sog35's point. It doesn't matter what percentage of the shares one owns. What matters is, regardless of the amount of shares, all share will enjoy an increase in earnings per share after a share reduction and should increase in price as a result.
Flabingo's question was a reasonable one. Are employee shared bought on the open market or are they offered through Apples treasury department, thus putting shares that have been repurchased back into the float.
Flab is right about Icahn. The Apple board needs someone with a financial background. They need someone who knows how to build a company from the ground up. Icahn was not born into money. He came from virtually nothing and is now one of the richest men in the world. And, he did it in the public equity market. I'd say he could teach the Apple board a thing or two about how to run a public company.
Buybacks benefit LONG TERM holders as long as the shares were bought when the stock was undervalued. And that's why Carl is pushing to buyback NOW when the stock is still undervalued.
You need to have an idea of what it is worth to make the assessment that it's undervalued so what should Apple's market cap be and why? The value comes from traders looking for gains. What's in it for a trader to buy Apple stock at $700? If there's no incentive for someone to buy at $700, it's not going to reach $700. If they buy back shares, the price goes up but that's not raising the market cap on its own.
Buying back shares doesn't necessarily raise the value placed on the company by traders (the market cap). It might create some upward momentum but it might not.
Apple's net income fell in 2013 to $37b. I expect Q1 2014 might show some gains over the year ago quarter but if not, the expectation going forward should be that they'll bring in roughly $40b per year. Say this keeps up for 5 years and they make another $200b and this increases their ~$140b cash, does that increase their market cap at all? The current value has to already assume this is the case anyway.
What event is going to raise Apple's market cap? Growth is slowing down. There's no existing major hardware market left to tackle that would grow their income significantly.
I suppose if they keep hauling in $40b every year for the next 20 years and never spend it, their cash/securities would be crazy but I don't think they'll do that. It's possible though as they've not really indicated what they want to spend it on.
Here's the thing that I don't get about the buyback urgency. Assuming Apple is taking shares off the table, there's no missed opportunity for them if they don't speed up the buyback. The missed opportunity is for remaining investors. However, if the company is undervalued then the market will eventually correct itself at which point Apple still has the cash/securities AND the share price is up.
If the share price stays the same or goes down after a year, what difference does it make buying it now or in a year's time? If it goes up, they don't need to buy it back.
Sog35's examples could have been better (e.g., his assertion that it 'could have put it into the market that gained 30% last year' makes no sense -- it could also have been put into a market that lost a half its value in 2008-09). But the concept of 'opportunity cost' is not some 'Wall Street' conspiracy.
It is simply an Econ 101 concept that says, 'if you put your investment in A, you're foregoing the opportunity to earn a return from putting it in a risk-equivalent investment, B -- i.e., there is an opportunity cost to the use of capital, sometimes just called a "cost of capital" in making any investment decision.'
Anyone who does not understand that is simply being obtuse. They're the types of people that the hucksters of the world -- like a Madoff -- love to do business with and profit from.
Add: The key phrase is 'risk-equivalent'.
My point was that, in spite of the actual meaning of the phrase "opportunity costs" .... in the real world, it is most often used to sway a decision involving someone else's capital and, more often than not, only in hindsight, so as to quantify it. Perhaps I should have used the sarcasm tag ... didn't think it was necessary, especially for you.
Why not hire Warren Buffet, by buying stock in his company, with the cash. I have never heard anybody praising the talent of Apple's CFO, or the Chairman of the board who works full time for Google. It is encouraging to me that Carl is still buying Apple stock at the current prices. He must still think it is undervalued.
How the hell will Ichan selling less than 1% of total outstanding shares tank the stock? Do you even read what you wrote? Everyday over 10,000,000 shares of Apple gets traded. Ichan selling his $3B won't even be a blimp on the radar. It would be different if Ichan own a huge chunk of Apple like 15-20%.
If Carl sells huge chunks repeatedly for several days it will move the stock downward unless there is heavy upward pressure. If the momentum goes down, others could sell as well. Especially people who also want Apple to buy the stock back. Those people most likely will get out after Apple's price goes up and levels out.
I use opportunity cost almost everyday in making decisions. Should I eat here or eat here. This place cost more but there food sucks. Should i take this road to work or this road. ect. ect. ect.
Should I leave $150B in a bank that earns only 1% a year or should I distribute some of that money to investors and let them decide how to invest it.........
As an example (I'm not saying Apple should have done this): if Apple decided to execute a special dividend at the end of 2012. Lets say they distributed $50B special dividend. I would have gotten about $15,000 in cash. I could have taken that cash and put it into my 401k and have gotten 30% returns in 2013. Instead its stuck in Apple bank losing literally BILLIONS of dollars every year because of inflation.
Was there risk in me putting $15k in a 401k? Hell yes. But I'm willing to take the risk. So are millions of other investors. Or they may have used the money to go on vacation, buy a house, ect. The bottom line let the investor decide what to do with the distribution. I'm pretty sure most would not want to stick the $15k in a bank earning less than 1% after taxes.
You make some interesting points, however, here's the problem, as I see it. Apple got to be the most valuable tech company in the world, and perhaps the most valuable public company .... by following it's core beliefs. That is, put their customers, product buyers, not shareholders, first. By focusing on customers, not shareholders. .... Now all of a sudden these same shareholders, who presumably bought Apple shares because they valued Apple's past performance, are letting Apple's "war fund" burn a whole in their pocket. Shareholder's goals do not always align with a company's goals. Disappointed shareholders should, imho, shit or get off of the pot. Apple knows what they plan to do in the future ... we don't. They can price out their future needs .... we can't. All of us, if we allow ourselves to be realistic, can imagine the possibility of a very shaky financial future, based on the fact that most governments are spending "like a drunken sailor' and printing money like it's "going out of style", (and according to bitcoin, it already is).
To change Apple's thinking from a consumer focussed company to a shareholder focussed company would be, in my opinion, drastically wrong. Apple is performing wonderfully under Tim Cook's direction and to listen to "bombastic Carl" would not serve any of us well. You have your opinion and I have mine. We are both free to act on our respective opinions. Peace, out.
That's why they need someone on the Board or Executive Committee that can help Wall Street understand Apple
You think that would help? Wall Street is stuck in the "market share matter" game. Apple doesn't operate that way have always been different. If Wall Street hasn't figured that out in the last 15 years, nothing is going to change their mind.
If Apple buys back 30% of the outstanding shares the stock will go up 30% if all things are equal. It really is just basic math.
The stock price goes up, not the market cap. Apple isn't valued more highly overall by doing this. They'd just be taking on debt to please stockholders who regret not selling at $700 and they'll sell and it'll fall.
I have a feeling that we may never see sub $600 shares after March 1st this year. At that point the buy back won't make much sense and would be much more risky.
So what's the problem? If it reaches $600 without the buyback, they retain their cash, their stock price is up and their market cap is up.
There are many high-end and luxury brands that did well in 2013. Tiffany & Co went up 50% in 2013.
You need to change the narrative if Wall Street is stuck in market share game. You need guys in PR, Media relations, BOD, Exec Committee who know how to talk big things like the CEO of Amazon. Its a game. You need guys who know how to play it.
I'll give you an example: Earnings Calls. Apple needs to innovate there. Why the hell are we still stuck listening to an audio only presentation once a quarter? Apple needs to have a video earnings call. Show all those beautiful graphs that show Apple unit growth, web share, profits vs competitors, growth in China, ect. It would be so much better for investors/analysis/media to see a video presentation.
Apple has been doing fine for the last 10-15 years without the WS distraction. In addition Amazon is out in force to distract WS from looking at their numbers.
Comments
I don't always buy stock,
but when I do%u2026
I buy AAPL
That's not right. You still own the same percentage in the company, but your stock become more valuable because there's less of them in circulation.
Shares aren't always retired. During a buyback a company is increasing its ownership of its own shares, they're investing in themselves. With your method it would make it easy for someone to become a majority shareholder.
I voted with Carl. He is 100% correct.
And Google has the founders and a VC on the board. Put Carl on the board. What is the downside?
The average stock holder owns <0.00001% of Apple. Even if Apple retires half its stock, the average share holder will still have <0.00001%. Basically this enriches Crazy Carl and hedge funds.
There are buyers and sellers all the time. Employees pay 85%, Apple pays the 15%.
Flabby's at it again. Carl will suck Apple dry and leave nothing behind. He's the crystalline entity of investors.
Jungmark,
You entirely missed sog35's point. It doesn't matter what percentage of the shares one owns. What matters is, regardless of the amount of shares, all share will enjoy an increase in earnings per share after a share reduction and should increase in price as a result.
Flabingo's question was a reasonable one. Are employee shared bought on the open market or are they offered through Apples treasury department, thus putting shares that have been repurchased back into the float.
Flab is right about Icahn. The Apple board needs someone with a financial background. They need someone who knows how to build a company from the ground up. Icahn was not born into money. He came from virtually nothing and is now one of the richest men in the world. And, he did it in the public equity market. I'd say he could teach the Apple board a thing or two about how to run a public company.
You need to have an idea of what it is worth to make the assessment that it's undervalued so what should Apple's market cap be and why? The value comes from traders looking for gains. What's in it for a trader to buy Apple stock at $700? If there's no incentive for someone to buy at $700, it's not going to reach $700. If they buy back shares, the price goes up but that's not raising the market cap on its own.
Buying back shares doesn't necessarily raise the value placed on the company by traders (the market cap). It might create some upward momentum but it might not.
Apple's net income fell in 2013 to $37b. I expect Q1 2014 might show some gains over the year ago quarter but if not, the expectation going forward should be that they'll bring in roughly $40b per year. Say this keeps up for 5 years and they make another $200b and this increases their ~$140b cash, does that increase their market cap at all? The current value has to already assume this is the case anyway.
What event is going to raise Apple's market cap? Growth is slowing down. There's no existing major hardware market left to tackle that would grow their income significantly.
I suppose if they keep hauling in $40b every year for the next 20 years and never spend it, their cash/securities would be crazy but I don't think they'll do that. It's possible though as they've not really indicated what they want to spend it on.
Here's the thing that I don't get about the buyback urgency. Assuming Apple is taking shares off the table, there's no missed opportunity for them if they don't speed up the buyback. The missed opportunity is for remaining investors. However, if the company is undervalued then the market will eventually correct itself at which point Apple still has the cash/securities AND the share price is up.
If the share price stays the same or goes down after a year, what difference does it make buying it now or in a year's time? If it goes up, they don't need to buy it back.
They're valued lower than Apple.
That is, unfortunately, pure silliness.
Sog35's examples could have been better (e.g., his assertion that it 'could have put it into the market that gained 30% last year' makes no sense -- it could also have been put into a market that lost a half its value in 2008-09). But the concept of 'opportunity cost' is not some 'Wall Street' conspiracy.
It is simply an Econ 101 concept that says, 'if you put your investment in A, you're foregoing the opportunity to earn a return from putting it in a risk-equivalent investment, B -- i.e., there is an opportunity cost to the use of capital, sometimes just called a "cost of capital" in making any investment decision.'
Anyone who does not understand that is simply being obtuse. They're the types of people that the hucksters of the world -- like a Madoff -- love to do business with and profit from.
Add: The key phrase is 'risk-equivalent'.
My point was that, in spite of the actual meaning of the phrase "opportunity costs" .... in the real world, it is most often used to sway a decision involving someone else's capital and, more often than not, only in hindsight, so as to quantify it. Perhaps I should have used the sarcasm tag ... didn't think it was necessary, especially for you.
It is encouraging to me that Carl is still buying Apple stock at the current prices. He must still think it is undervalued.
Because Wall Street doesn't understand Apple.
How the hell will Ichan selling less than 1% of total outstanding shares tank the stock? Do you even read what you wrote? Everyday over 10,000,000 shares of Apple gets traded. Ichan selling his $3B won't even be a blimp on the radar. It would be different if Ichan own a huge chunk of Apple like 15-20%.
If Carl sells huge chunks repeatedly for several days it will move the stock downward unless there is heavy upward pressure. If the momentum goes down, others could sell as well. Especially people who also want Apple to buy the stock back. Those people most likely will get out after Apple's price goes up and levels out.
I use opportunity cost almost everyday in making decisions. Should I eat here or eat here. This place cost more but there food sucks. Should i take this road to work or this road. ect. ect. ect.
Should I leave $150B in a bank that earns only 1% a year or should I distribute some of that money to investors and let them decide how to invest it.........
As an example (I'm not saying Apple should have done this): if Apple decided to execute a special dividend at the end of 2012. Lets say they distributed $50B special dividend. I would have gotten about $15,000 in cash. I could have taken that cash and put it into my 401k and have gotten 30% returns in 2013. Instead its stuck in Apple bank losing literally BILLIONS of dollars every year because of inflation.
Was there risk in me putting $15k in a 401k? Hell yes. But I'm willing to take the risk. So are millions of other investors. Or they may have used the money to go on vacation, buy a house, ect. The bottom line let the investor decide what to do with the distribution. I'm pretty sure most would not want to stick the $15k in a bank earning less than 1% after taxes.
You make some interesting points, however, here's the problem, as I see it. Apple got to be the most valuable tech company in the world, and perhaps the most valuable public company .... by following it's core beliefs. That is, put their customers, product buyers, not shareholders, first. By focusing on customers, not shareholders. .... Now all of a sudden these same shareholders, who presumably bought Apple shares because they valued Apple's past performance, are letting Apple's "war fund" burn a whole in their pocket. Shareholder's goals do not always align with a company's goals. Disappointed shareholders should, imho, shit or get off of the pot. Apple knows what they plan to do in the future ... we don't. They can price out their future needs .... we can't. All of us, if we allow ourselves to be realistic, can imagine the possibility of a very shaky financial future, based on the fact that most governments are spending "like a drunken sailor' and printing money like it's "going out of style", (and according to bitcoin, it already is).
To change Apple's thinking from a consumer focussed company to a shareholder focussed company would be, in my opinion, drastically wrong. Apple is performing wonderfully under Tim Cook's direction and to listen to "bombastic Carl" would not serve any of us well. You have your opinion and I have mine. We are both free to act on our respective opinions. Peace, out.
You think that would help? Wall Street is stuck in the "market share matter" game. Apple doesn't operate that way have always been different. If Wall Street hasn't figured that out in the last 15 years, nothing is going to change their mind.
The stock price goes up, not the market cap. Apple isn't valued more highly overall by doing this. They'd just be taking on debt to please stockholders who regret not selling at $700 and they'll sell and it'll fall.
So what's the problem? If it reaches $600 without the buyback, they retain their cash, their stock price is up and their market cap is up.
Apple has been doing fine for the last 10-15 years without the WS distraction. In addition Amazon is out in force to distract WS from looking at their numbers.
If it's nothing to sneeze about, why do you say "All Icahn wants..."?