Apple issues $14B worth of bonds to fund buybacks, corporate initiatives
Apple on Monday officially issued $14 billion worth of bonds, tapping the market to fund corporate operations like share buybacks and dividends to shareholders.
Credit: SEC
News of Apple's plan to sell bonds first surfaced at the beginning of February. On Feb. 8, the company made the issuance official, announcing that it would issue debt in five parts.
Apple is issuing $2.5 billion worth of 0.7% bonds that mature in 2026, $2.75 billion worth of 1.65% bonds that mature in 2031, $1.5 billion worth of 2.375% bonds that mature in 2041, $3 billion worth of 2.65% bonds that mature in 2051, and $1.75 billion worth of 2.8% bonds that mature in 2061. Interest will be paid on the note semi-annually in February and August each year.
The Cupertino company plans to use the proceeds for general corporate purposes, including stock buybacks, paying dividends to shareholders, working capital, capital expenditures, repayment of debt, or acquisitions.
Today's debt sale also marks the third time that Apple has tapped the market since May 2020. Apple issued bond sales of $8 billion in May, and another $5.5 billion bond sale in August.
Credit: SEC
News of Apple's plan to sell bonds first surfaced at the beginning of February. On Feb. 8, the company made the issuance official, announcing that it would issue debt in five parts.
Apple is issuing $2.5 billion worth of 0.7% bonds that mature in 2026, $2.75 billion worth of 1.65% bonds that mature in 2031, $1.5 billion worth of 2.375% bonds that mature in 2041, $3 billion worth of 2.65% bonds that mature in 2051, and $1.75 billion worth of 2.8% bonds that mature in 2061. Interest will be paid on the note semi-annually in February and August each year.
The Cupertino company plans to use the proceeds for general corporate purposes, including stock buybacks, paying dividends to shareholders, working capital, capital expenditures, repayment of debt, or acquisitions.
Today's debt sale also marks the third time that Apple has tapped the market since May 2020. Apple issued bond sales of $8 billion in May, and another $5.5 billion bond sale in August.
Comments
(Bondholders would not be considered owners).
Although I don't understand the numbers shown:
Is that supposed to be 32% for individual stakeholders? Even so where is the remaining 8% or so?
All this means is that Apple is taking advantage of historically low interest rates to borrow the money to fund promised dividends and planned stock buy backs. Corporations borrow money by issuing long-term bonds. For example the article mentions that part of the offering is a set of "$1.75 billion worth of 2.8% bonds that mature in 2061." That just means that major investors (like mutual funds) are buying promissory notes (bonds) from Apple that will pay 2.8% interest (twice a year) for the next 40 years (at which time Apple gives them the original money back). If you look at a mutual fund prospective (for a fund that includes more than just equity (stocks), you'll see bonds like this listed. These bonds aren't really available to the individual investor (except as part of these mutual funds).
Also, the fact that Apple gets such low interest rates reflects "the markets" confidence that Apple will be around and financial healthy for the next 40 years to be able to make those payments. If a company with an uncertain future tried to raise money this way, they would have to pay much higher interest to make up for the default risk.
Why would Apple do this--taking on debt when they have billions and billions in the bank (actually in other investments, not sitting in a bank account)? Part of it is could be for tax benefits, but the main reason is because Apple believes it can make a profit doing this. They can borrow money at a low interest rate (2.8% and below) while making a higher rate of return on their existing cash.
It doesn't mean that at all. Dividends are how profits are distributed to shareholders. While companies use bond proceeds for dividends (and Apple does do this), the sale of bonds is generally done because it is cheaper than using cash (e.g., repatriating cash would require paying taxes). That is a "wise use of capital."
Moreover, the fact that the makeup of the Forture 500 changes over time doesn’t mean that " financial managers [are] sucking the life blood out of the corporations they control." The makeup of the Fortune 500 changes for many reasons, among them the emergence of new industries and new companies that outpace their competitors. It would be quite absurd if the makeup of the Fortune 500 never changed since it would point to a lack of competition and innovation.
I think most people here realize that even when a corporation or institutional investor owns some stock in a company, they are really just acting as middlemen for the little guy who owns their stock, whether directly or indirectly (and often unknowingly) through instruments like mutual funds.
All companies, whether trade in the stock market or not, are all owned by individuals. Any assets owned by a company is ultimately owned by individuals.
One thing that hasn't been discussed yet is the nationality of the individuals who own Apple stock. Is this untrackable or trackable?
Do you have any purpose behind these rambling questions? What does it mattter what the nationality of investors in a publically traded company are?
George is right and you are wrong, Apple and most American companies need to start thinking like Norway and less like the UK when it comes to long term money management, spending like a drunken sailor doesn’t work, you would think that the pandemic would have galvanized more people and companies spend and invest wisely.
Taking on debt when you don’t need to is a fools game, saving, living within your means and investing is the only way to go, long Apple....
Crazy property taxes that would be Texas....Hmm
IBM, Xerox, Intel, HP, and Kodak, say differently all are on the long slow decline, MBA’S and bean counters are eating those companies out from the inside.
BTW "Tim may not be able to design a product like Steve," said Berkshire Hathaway's Warren Buffet, "but Tim understands the world to a degree that very, very few CEOs I've met over the past 60 years could match."
I don't know about you, but I give Buffet's words more credibility that randos on the internet.
Yes, dividends -- which historically have been a fair return to investors -- are legitimate. But that's not what is going on here (and with other corporations). Rather it is means to prop up a stock price. And even if it were a legitimate dividend (which it isn't), having to borrow in order to pay for it makes it illegitimate.