Apple preparing $7 billion U.S. bond sale to support stock buyback program

AppleInsiderAppleInsider
Posted:
in AAPL Investors edited July 2016
Apple continues to leverage bond sales and low interest rates to fund both its stock buyback program and green initiatives, with an upcoming third sale this year to hit US debt capital markets.




According to the Financial Times, the sale is three-times over subscribed, and will happen in five parts. The joint book running managers for this bond sale are likely again Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank Securities, and J.P. Morgan, the same managers as the last two U.S. sales.

The February US offer was a $12 billion effort, with a "Green bond" issue for $1.5 billion to finance clean energy projects. Bond sales in 2015 generated $8 billion for Apple.

A bond sale in Taiwan concluded on June 8, and generated $1.38 billion in 30-year bonds, 40 percent more than originally expected.

Apple intends on spending $58 billion in the span of the next two years on stock buyback programs. In April, the company claimed that the capital return program funded in part by the bond sales, has returned more than $163 billion to investors since its activation in August 2012. Share repurchases accounted for $117 billion of the $163 billion.

Comments

  • Reply 1 of 17
    crowleycrowley Posts: 10,453member
    If they're three times oversubscribed, maybe they're offering too high a yield?

    Interesting that S&P didn't give a AAA rating.  Junk housing bonds get the highest rating, but one of the richest and most profitable companies in the world offer a low rate bond that they can cover today with cash reserves, and that's seen as riskier.  To hell with the rating agencies.
    Solianantksundarambadmonklatifbp
  • Reply 2 of 17
    gmgravytraingmgravytrain Posts: 882member
    Apple is spending so much money on buybacks it's unreal. I guess it's a good thing but I think of how they could have spent more money on buying some other businesses to increase revenue. Wall Street positively loves Amazon for its business expansion. They keep buying up other businesses and the company keeps growing and growing. If Bezos keeps this up, they'll definitely pass Apple in market cap in a few more years. Amazon stock just keeps soaring without limits while Apple struggles and can't seem to shake the doom and gloom of being a dying company.

    Amazon has a P/E of over 300 and Apple can't even manage a P/E of 15 due to lack of investor confidence. It's just crazy. Amazon investors love Bezos and Apple investors hate Tim Cook. Amazon is always being praised while Apple is constantly criticized as being poorly run. Amazon is run perfectly for investors while it seems Apple doesn't have a clue what investors want. Even the buybacks aren't good enough for Apple investors. I really don't understand Apple's at all. They seem to keep doing what no one wants them to do.
    edited July 2016
  • Reply 3 of 17
    therunningvmtherunningvm Posts: 96member
    Apple is spending so much money on buybacks it's unreal. I guess it's a good thing but I think of how they could have spent more money on buying some other businesses to increase revenue. Wall Street positively loves Amazon for its business expansion. They keep buying up other businesses and the company keeps growing and growing. If Bezos keeps this up, they'll definitely pass Apple in market cap in a few more years. Amazon stock just keeps soaring without limits while Apple struggles and can't seem to shake the doom and gloom of being a dying company.

    Amazon has a P/E of over 300 and Apple can't even manage a P/E of 15 due to lack of investor confidence. It's just crazy. Amazon investors love Bezos and Apple investors hate Tim Cook. Amazon is always being praised while Apple is constantly criticized as being poorly run. Amazon is run perfectly for investors while it seems Apple doesn't have a clue what investors want. Even the buybacks aren't good enough for Apple investors. I really don't understand Apple's at all. They seem to keep doing what no one wants them to do.

    Nope, its the other way around. Apple investors are retarded. Well, wall street as a hole is retarded. Those guys only care about how many iPhones apple has sold. You think apple buying a bunch of companies is going to change anything? Think again.

    Apple has always been "doomed" and their eyes. No matter what apple does, they’re always "doomed".

    And those Wall Street morons keep believing those so-called, analysts. Apple doesn't do what investors want because it isn't good for them in the long term. I think those people are bitter that apple didn't do what they wanted, and still turned out successful.

    toranagafastasleepradster360patchythepirate
  • Reply 4 of 17
    drewys808drewys808 Posts: 549member
    gmgravytrain said:
     I really don't understand Apple's at all. They seem to keep doing what no one wants them to do.
    YES... you "don't understand Apple at all".
    Leave it at that.

    Hey, aren't you the same guy posting on Jul 20 parading MSFT victory banners while pissing on AAPL's cheerios?
    I believe you used the phrase "Apple is doomed".

    You are a piece of work.




    Solicintospacificfilmfastasleeppatchythepiratenolamacguy
  • Reply 5 of 17
    toranagatoranaga Posts: 17member
    drewys808 said:
    gmgravytrain said:
     I really don't understand Apple's at all. They seem to keep doing what no one wants them to do.
    YES... you "don't understand Apple at all".
    Leave it at that.

    Hey, aren't you the same guy posting on Jul 20 parading MSFT victory banners while pissing on AAPL's cheerios?
    I believe you used the phrase "Apple is doomed".

    You are a piece of work.




    Spare us the negativity. The poster made some valid points. 
    command_f
  • Reply 6 of 17
    cintoscintos Posts: 113member
    Gee folks, it's all clear to me. Apple does not care about investors, it cares about its customers. Those customers reward Apple with the title of best-respected company in the world and the most profitable company in the world. Apple makes more profit in a given day than AMZN does in a quarter. So who cares about profit? Not Mr Market, it seems. Yes, and some day Apple will cease to impress its customers, but I'm betting that all the "peak" noise is just that - noise. Re the iPad: Does Mr. market realize that Intel spent BILLIONS over the last two years trying to jam their high end cpu chips into low-end tables (contra revenue subsidies) in order to capture the iPad magic? Guess what - it failed. Similarly, Samsung takes the slim profit they glean from huge volumes of low-end handsets to fund the sale of their top end phone - by way of free TVs with a handset, and 2-for-1 sales. Meanwhile Apple just delivers a great ecosystem and great products that last far longer in the wild than Mr. Market wants them to (planned obsolescence is great for replacement unit sales, but bad for the customer.)
    fastasleepMacPronolamacguy
  • Reply 7 of 17
    mcarlingmcarling Posts: 1,106member
    crowley said:
    If they're three times oversubscribed, maybe they're offering too high a yield?
    Apple don't set a yield.  Bond yields are set by the market, in what are essentially auctions.
  • Reply 8 of 17
    sflocalsflocal Posts: 6,093member
    toranaga said:
    drewys808 said:
    YES... you "don't understand Apple at all".
    Leave it at that.

    Hey, aren't you the same guy posting on Jul 20 parading MSFT victory banners while pissing on AAPL's cheerios?
    I believe you used the phrase "Apple is doomed".

    You are a piece of work.




    Spare us the negativity. The poster made some valid points. 
    Nonsense.  Amazon is only has that high P/E because moronic investors/Wall Street believe that one day - if ever - Amazon will have some magic "thing" that justifies its high price.  What will happen is Bezos will stumble badly down the road, and just as fast the market will hose that stock.

    Amazon is burning through money, barely making any profit, yet Apple is essentially sitting on a border-line infinite amount of money, making more each quarter... and this guy says "Apple is doing what no one wants them to do?"  That was a serious smh-moment there.  Apple became a ridiculously successful company because of exactly that... doing what it thinks is the right thing regardless what the blowholes of wall street and the casino "investors" want them to do.  They don't care about Apple.  They have zero desire to see the company prosper.  They just want a quick-buck and move on.

    Sure, Amazon may be doing something similar, but the reality is that they don't rally make anything but ship other people's stuff.  
    patchythepiratenolamacguy
  • Reply 9 of 17
    Rayz2016Rayz2016 Posts: 6,957member
    gmgravytrain said:
    Apple is spending so much money on buybacks it's unreal. I guess it's a good thing but I think of how they could have spent more money on buying some other businesses to increase revenue. Wall Street positively loves Amazon for its business expansion. They keep buying up other businesses and the company keeps growing and growing. If Bezos keeps this up, they'll definitely pass Apple in market cap in a few more years. Amazon stock just keeps soaring without limits while Apple struggles and can't seem to shake the doom and gloom of being a dying company.

    Amazon has a P/E of over 300 and Apple can't even manage a P/E of 15 due to lack of investor confidence. It's just crazy. Amazon investors love Bezos and Apple investors hate Tim Cook. Amazon is always being praised while Apple is constantly criticized as being poorly run. Amazon is run perfectly for investors while it seems Apple doesn't have a clue what investors want. Even the buybacks aren't good enough for Apple investors. I really don't understand Apple's at all. They seem to keep doing what no one wants them to do.

    <facepalm/>

    A few years ago, Wall Street said that Apple would go bust if they didn't produce a cheaper smartphone. Today, Wall Street is worried that Apple's cheaper smartphone is going to break Apple because of its smaller margins. 

    Are we really quoting Wall Street as the bastion of common sense?
    patchythepiratenolamacguy
  • Reply 10 of 17
    Rayz2016Rayz2016 Posts: 6,957member

    cintos said:
    Gee folks, it's all clear to me. Apple does not care about investors, it cares about its customers. Those customers reward Apple with the title of best-respected company in the world and the most profitable company in the world. Apple makes more profit in a given day than AMZN does in a quarter. So who cares about profit? Not Mr Market, it seems. Yes, and some day Apple will cease to impress its customers, but I'm betting that all the "peak" noise is just that - noise. Re the iPad: Does Mr. market realize that Intel spent BILLIONS over the last two years trying to jam their high end cpu chips into low-end tables (contra revenue subsidies) in order to capture the iPad magic? Guess what - it failed. Similarly, Samsung takes the slim profit they glean from huge volumes of low-end handsets to fund the sale of their top end phone - by way of free TVs with a handset, and 2-for-1 sales. Meanwhile Apple just delivers a great ecosystem and great products that last far longer in the wild than Mr. Market wants them to (planned obsolescence is great for replacement unit sales, but bad for the customer.)
    It may be clear to you, but it's still rocket science to many people, which is why it has to be repeated over and over again.

    There are many things that could be improved at Apple (and that really goes for any company), but the improvements that are needed are not going to be found in any talking head working on Wall Street.
  • Reply 11 of 17
    crowleycrowley Posts: 10,453member
    mcarling said:
    crowley said:
    If they're three times oversubscribed, maybe they're offering too high a yield?
    Apple don't set a yield.  Bond yields are set by the market, in what are essentially auctions.
    Really?  Didn't know that, thanks.

    So does that mean the market interest will drive the bond yield down?
  • Reply 12 of 17
    radster360radster360 Posts: 546member
    No one likes to be proven wrong! And that is what Wall Street is acting like. Apple has almost always proved Wall Street wrong and the street doesn't like that. The recent quarter results proved it once again. Wall Street is no longer a place for people believing in companies, long term and fundamentals. Wall Street cares only about a growth for current and next quarter, everything else doesn't matter - That is why it keep rewarding companies like Amazon, Netflix, etc.

    Though, I think Apple should actually announce one time special dividend to bring back some of the investors interested in the company instead of over extending the buy backs.

  • Reply 13 of 17
    anantksundaramanantksundaram Posts: 20,404member
    mcarling said:
    crowley said:
    If they're three times oversubscribed, maybe they're offering too high a yield?
    Apple don't set a yield.  Bond yields are set by the market, in what are essentially auctions.
    Prices in auctions do depend on demand, as you might know...
  • Reply 14 of 17
    crowleycrowley Posts: 10,453member
    I'm not sure I understand, on reflection. How can the market set the yield?  Apple surely get a say in whether they want to sell at a particular yield?
  • Reply 15 of 17
    anantksundaramanantksundaram Posts: 20,404member
    crowley said:
    I'm not sure I understand, on reflection. How can the market set the yield?  Apple surely get a say in whether they want to sell at a particular yield?
    Apple sets the coupon. Given an issuer's credit rating (i.e., default risk), the market sets the yield (the market interest rate), give or take a few basis points. On top of that, factors such as liquidity risk will factor in.

    However, since most bonds are issued at par, the coupon rate is set equal to the market yield. So yes, Apple would not issue if it thought that the yield was not attractive.
  • Reply 16 of 17
    gatorguygatorguy Posts: 24,213member
    anantksundaram said:
    crowley said:
    I'm not sure I understand, on reflection. How can the market set the yield?  Apple surely get a say in whether they want to sell at a particular yield?
    Apple sets the coupon. Given an issuer's credit rating (i.e., default risk), the market sets the yield (the market interest rate), give or take a few basis points. On top of that, factors such as liquidity risk will factor in.

    However, since most bonds are issued at par, the coupon rate is set equal to the market yield. So yes, Apple would not issue if it thought that the yield was not attractive.
    You sir are one of the few exceptionally knowledgeable members on this subject. The explanation is appreciated. 
  • Reply 17 of 17
    command_fcommand_f Posts: 422member
    crowley said:
    I'm not sure I understand, on reflection. How can the market set the yield?  Apple surely get a say in whether they want to sell at a particular yield?
    Apple sets the coupon. Given an issuer's credit rating (i.e., default risk), the market sets the yield (the market interest rate), give or take a few basis points. On top of that, factors such as liquidity risk will factor in.

    However, since most bonds are issued at par, the coupon rate is set equal to the market yield. So yes, Apple would not issue if it thought that the yield was not attractive.
    Which, I think, means that Apple sets a defined return payable on the bond. However, since the bond is bought at auction, or later on the market, the actual return depends on how much you pay for it (Apple pays a given amount, if you paid twice as much for the bond then your percentage yield halves). The confusion with bonds in general arises because the fixed return is expressed as a percentage of the face value (the coupon) whereas the real price of the bond is rarely its face value.

    I am open to correction on this, I'm not a finance guy.
    edited July 2016
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