Not uncommon, especially when the company makes commodity items whose markets periodically get close to saturation. Investors (short-sighted ones, based on AAPL's history) see good results as a reason to think the next quarter won't be so great. They model this on individual behavior (hey we each just bought AppleWatches, so we won't each be buying another next quarter) which ignores a lot of other factors. Of course, last week's news about taptic engine issues didn't help.
nightsky wrote: »
Presumably they wouldn't need shareholder approval if they just keep buying back their own shares every year.
nightsky wrote: »
How many shares are there? How much would it costs to buy them back at today's market value?
My understanding is that a company with less than 500 shareholders does not have to be listed on an exchange and traded publicly. These in effect are privately-held companies. However, they are still owned by those investors, not the company itself. If the number of investors increases beyond the threshold, SEC rules would require the shares to be listed again. The key take-away point from all of this is that a public company cannot buy itself. In any scenario the remaining stock is still held by investors.
The going private scenario requires setting up a separate equity capital company (in this case call it "Apple Holdings LLC") which raises the money required to buy a controlling interest in the target company from investment banks and wealthy individuals. More often than not these are hostile takeovers and are leveraged by the assets of the target company. This often results in the dismemberment of the target to pay the debt incurred by the takeover, which was probably the point of the hostile takeover exercise in the first place, the raider seeing more value in the pieces of the company broken up than in the company as a whole (Icahn's takeover of TWA being a perfect example of this).
So even setting aside for the moment the immense financial problems inherent with taking over a company with as much equity as Apple, and the vast hostility it would encounter from existing investors (and presumably the board), it should be understood that a public company going private carries no positive connotations. It is a strategy used by raiders to salvage some value from a sick company where the pieces are worth more than the whole. Does anyone seriously believe this describes Apple?
Richie Rich is dead?
Dude, where was your spoiler warning???
Where did you think Casper the friendly ghost came from?
"Will Apple, or more correctly, will some combination of large shareholders ever be in a position to buy out the shares and take Apple private?"
Isn't the key question, Does Apple generate the cashflow necessary to service the debt associated with taking itself private?
dr millmoss wrote: »
it should be understood that a public company going private carries no positive connotations.
dr millmoss wrote: »
It is a strategy used by raiders to salvage some value from a sick company where the pieces are worth more than the whole. Does anyone seriously believe this describes Apple?
Valuations are always based on future earnings. I can't recall the last time a public company in good financial shape was taken private. Any effort of this kind, even assuming it was done with the agreement of the board and management, would require leverage, meaning lots of debt. If the stock price was depressed it would be on account of lowered earnings, so you don't get a lower buyout price without reduced cash flow to service it.
dr millmoss wrote: »
If the stock price was depressed it would<span style="line-height:1.4em;"> be on account of lowered earnings, so you don't get a lower buyout price without reduced cash flow to service it.</span>
What you are describing here is a hostile takeover. I don't believe a company can agree to be taken over by the drip system, and I sure don't see Apple's board agreeing to it even if they could. Poison pills in the company bylaws make a hostile takeover virtually impossible. TWA was a company in crisis, which Carl Icahn ultimately took over with the purpose of breaking up, because he saw that the parts were worth more than the whole. I don't see where anything in the history of takeovers (the more accurate translation of the term "going private" being used here) that applies to Apple.
You aren't the first one to post that suggestion, but it shouldn't be difficult to figure out why it doesn't work this way. The stocks themselves aren't debt. If you understand that, you'll understand why they can't purchase their own sovereignty. They are effectively using money managed by the company itself on behalf of its owners (shareholders) to buy the stakes of other shareholders. At that point Apple doesn't own that piece of Apple. It's owned by the remaining shareholders, as money managed on their behalf was used to buy out other stakes. Make sense? Otherwise you could have all kinds of corrupt gambits to work against the interest of the company's owners.
Many of those regulations would still apply, including ones that require things such as shareholder meetings. Anyway can you explain how Apple would be in a better situation if it was held by a group of equity firms and investors rather than publicly traded? That's how companies go private. They are bought out. As I pointed out already, Apple doesn't own a piece of itself, because they don't have that authority.
desuserign wrote: »
Interesting thing: if you express the thought that an AI article is "dumb" or "click bait," AI immediately removes it. No dissenting options or thoughts tolerated.
Next time AI presses to be treated the same as traditional media, desiring press shielding and credentials, I'll know better than to support them.
"One investment banker who spoke with AppleInsider believes that an Apple buyout — taking into consideration Apple's position at the top of its industry as the most profitable company on earth — would require an offer of at least 50 percent to be viable, which would add another $140 billion to the price tag. Another banker from a rival firm thinks the total cost of a leveraged buyout would approach $2 trillion."
It's just a thought experiment, nothing more.
As for what the IBers said, it only works that management would consider a buyout and pay a large premium is if they believed that the company was at least undervalued by that much and more. Of course, if you can't come up with the money yourself, and who can, then you have to have equity partners, just like Dell did, and then instead of little shareholders you can step on, you have giant partners who can be even more demanding than the Icahns of the world. Unless you're hugely undervalued, what would be the point of exchanging small taskmasters for a large taskmaster?
And, if an IBer thought that any buyout would value Apple at $2T, then that's what Apple's cashflow must be worth. Either he's full of it, or Apple is way undervalued since it's cashflow is currently valued at only $735B.
Ultimately, as Warren Buffett likes to say, it doesn't matter, since it'll never happen. In the short term, the market is a voting machine (they've voted for $735B), and in the long term, it's a weighing machine (the summation of Apple's future cashflows). If you hold it long term like I have and will continue to do, then you'll get Apple's true weight, aka true market cap. The market cap is supposed to reflect the summation of its future cash flows. The market could get that wrong, which is the part where they're voting on what they think the future cash flows will be. But, if you've followed Apple for long, you'll realize the market has for years been underestimating Apple's future cash flows, their earnings estimates have lagged reality. Who cares? You just have to hold Apple long enough to actually collect those cash flows.
For example, Apple has earned $47.8B in the last 12 months. If Apple were cash balance neutral, in theory, they'd return that $47.8B to shareholders thru dividends or buybacks. The next year they'd return whatever the new full year earnings would be. Let's say in 20 years, earnings don't grow, and they keep earning $47.8B each year, then you'd have a 20 year annuity that paid $47.8B. What would that be worth to the investor? Of course, professionals, will deflate the future cashflows by inflation estimates. Also, they'll estimate some growth rate, which might change over time. Some estimate higher growth, some lower. Either way, just by looking at Apple's current static earnings, $47.7B, and current market value of $735B, Apple looks comparatively cheap. I bought Apple shares when the company was only worth $75B, so if Apple were to return $47.7B a year, then in less than 2 years, I get all my original investment back. It's really all gravy for us long-term Apple shareholders, but even if you haven't held Apple for long, Apple is generating gobs of money that will likely eventually find their way to you, thru dividends or repurchases. I wouldn't worry so much about valuations, but about how the company is performing, and right now, they're firing on all cylinders.
It may not be long before Apple adopts a cash balance neutral policy, meaning that they will return all excess cash. Right now, the cash balance continues to grow, even though they keep raising the cash return amount.