Apple sells $7B in debt in first bond offer since $285B cash repatriation [u]

Posted:
in AAPL Investors edited September 4
Apple is getting ready to offer bonds for the first time in almost two years, looking to raise cash to fund share buybacks and other activities without needing to use its repatriated cash hoard.

SEC seal on building


A preliminary prospectus for the bond market offering was published to Apple's investor relations site on Wednesday, albeit in an incomplete state. The SEC filing did not reveal how much Apple is looking to raise from the bond sale, but a follow-up report from Bloomberg puts the figure at $7 billion.

Under the "Use of Proceeds" section of the filing, Apple plans to use the cash raised "for general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt."

Apple revealed in its April quarterly results the company would be raising its share buyback program value to $75 billion. At the same time, Apple raised the quarterly dividend by 5%, paying more to shareholders over time.

It also advises the company may temporarily invest funds that are not immediately needed in other short-term investments.

The bond offering is unusual, as Apple has not made any such moves since late 2017. It also marks the first time since the company took advantage of tax rule changes to bring $285 billion in cash reserves stored overseas to the United States.

As Apple still has $211 billion on hand, it may appear to be counterintuitive to perform a bond offering, but it is an easier way for Apple to raise funds. The currently low yields of US Treasury bonds could make Apple's bonds a better deal to potential investors, with the cost to Apple likely to be far lower than if it were to borrow the same cash via other means.

Updated with information from Bloomberg.
«1345

Comments

  • Reply 1 of 90
    Very interesting. It seems like it could only mean that they have specific and unrealized plans for the pile of cash they’re already sitting on, and plans that they are confident will yield a better return than the bonds will for their purchasers, or one huge plan that will require all of the stockpile plus the additional funds, which seems less likely. Either way, it’s probably a good sign. 
  • Reply 2 of 90
    Are they going after the negative bonds appearing in European markets recently?

    An old mentor of mine said the best money to spend was someone else’s, especially if it’s free. 
    StrangeDaysSpamSandwichtoysandme
  • Reply 3 of 90
    lkrupplkrupp Posts: 7,464member
    Good to hear. My main IRA already has some AAPL in it. One of my accounts is moving to a different kind of management that includes ETF bond funds and Apple is listed as a primary investment vehicle. Having both Apple stocks and bonds in my portfolio makes me feel more secure. Great company that rewards its investors handsomely.
    edited September 4 AppleExposed
  • Reply 4 of 90
    lkrupplkrupp Posts: 7,464member

    As Apple still has $211 billion on hand, it may appear to be counterintuitive to perform a bond offering, but it is an easier way for Apple to raise funds. 
    Counterintuitive only to those who don’t grok how corporate finance works. 
  • Reply 5 of 90
    Interest rates for companies like Apple or lets say Berkshire Hathaway are crazy low.  Might I suggest Apple issue a couple hundred billion in debt as does Berhshire and together they take the company Private.  
  • Reply 6 of 90
    I’m not a fan of Apple’s financial engineering.  It may be the “smart” choice, but it’s smart until it’s not.  I’d rather have Apple debt free.
    GeorgeBMac
  • Reply 7 of 90
    SoliSoli Posts: 9,381member
    I’m not a fan of Apple’s financial engineering.  It may be the “smart” choice, but it’s smart until it’s not.  I’d rather have Apple debt free.
    No corporation is without liabilities.
    lkrupptrashman69pscooter63StrangeDaysCarnagejony0
  • Reply 8 of 90
    gatorguygatorguy Posts: 21,302member
    It's quite likely Apple hasn't repatriated all that overseas cash. AFAIK there's been no one who claims they have, outside of something like this AI article.

    There's a reason they've stopped reporting how much of it is held "overseas", as have many other big companies such as Google, Microsoft, Oracle....
    https://www.bloomberg.com/news/articles/2018-12-19/u-s-offshore-repatriated-cash-fell-almost-50-in-third-quarter

    The Isle of Jersey is probably still a thing. 
    edited September 4 muthuk_vanalingam
  • Reply 9 of 90
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    chasm
  • Reply 10 of 90
    gatorguygatorguy Posts: 21,302member
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    SpamSandwichmuthuk_vanalingam
  • Reply 11 of 90
    tjwolftjwolf Posts: 306member
    salmonstk said:
    Interest rates for companies like Apple or lets say Berkshire Hathaway are crazy low.  Might I suggest Apple issue a couple hundred billion in debt as does Berhshire and together they take the company Private.  
    Apple's market cap is close to a trillion.  A couple hundred billion here and there aren't going to cut it.
  • Reply 12 of 90
    Apple is hedging how cash will be used. Tariffs on Chinese imports will hurt and they are hedging on need to stay alive for six more years of Trump's attack on the economy. 
    GeorgeBMac
  • Reply 13 of 90
    tjwolftjwolf Posts: 306member

    I’m not a fan of Apple’s financial engineering.  It may be the “smart” choice, but it’s smart until it’s not.  I’d rather have Apple debt free.

    The company is simply borrowing against the money they already have in the bank (overseas) because it's financially advantageous.  They're not going into the red, so your trepidations, much less calling their decision "financial engineering", make no sense to me.
    fastasleepStrangeDays
  • Reply 14 of 90
    tjwolftjwolf Posts: 306member

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    edited September 4 trashman69
  • Reply 15 of 90
    dougddougd Posts: 290member
    Greedy bastards
    GeorgeBMac
  • Reply 16 of 90
    gatorguygatorguy Posts: 21,302member
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    edited September 4
  • Reply 17 of 90
    tjwolftjwolf Posts: 306member
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    edited September 4
  • Reply 18 of 90
    gatorguygatorguy Posts: 21,302member
    tjwolf said:
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    Ah, I see there's a difference in the interpretation of "residual value". I'll put it differently:
    The Apple stock that is repurchased is retired, burned in effect, and has no residual book value. Indisputable fact.
    Is that better?

    On top of that there is no evidence you could offer that the stock repurchases have been effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does. 
    edited September 4
  • Reply 19 of 90
    It’s probably cheaper to issue these bonds and tax deduct the debt than repatriate more money from overseas to the US. 
    StrangeDays
  • Reply 20 of 90
    gmacgmac Posts: 76member
    gatorguy said:
    tjwolf said:
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    Ah, I see there's a difference in the interpretation of "residual value". I'll put it differently:
    The stock that is repurchased is retired, burned in effect, and has no residual book value. Is that better? On top of that there is not evidence you could offer that the stock repurchases were effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does. 
    Buying back and retiring the shares reduces the shares outstanding, which increases the EPS and keeping Apple's EPS multiple constant, the share price will go up. 
    edited September 4 GeorgeBMacCarnage
Sign In or Register to comment.