Apple issues $6.5B bond to fund buyback, acquisitions

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Comments

  • Reply 21 of 71
    crowleycrowley Posts: 10,453member
    The thing that puzzles me is who is buying these bonds at historically low interest rates?  Doesn’t seem like a great investment.
  • Reply 22 of 71
    lkrupplkrupp Posts: 10,557member
    mpantone said:
    Apple buys other companies for specific technological advantages to be deployed later in a long term manner -- not for immediate marketshare growth.

    All of the antitrust activity is focused around their actual customer-facing services, like the App Store. It's not about some obscure startup that Apple acquired for their search algorithm.

    Apple doesn't try to buy AMD, Marvell, Texas Instruments, Netflix, etc. They buy companies like PA Semi and Intrinsity and spend years incorporating that expertise in their own products.
    The only major acquisition was Beats. Apparently Apple just doesn’t do the big stuff like buying Disney.
    danox
  • Reply 23 of 71
    lkrupplkrupp Posts: 10,557member
    doggone said:
    I generally do not like companies acquiring debt when they have the capability to pay in cash since it creates a burden that could impact them in the future.  However I do understand that at this time borrowing is exceptionally cheap and makes financial sense to fund paybacks and dividends.

    If you look at Apple's debt history in the last decade, the debt load has been around $100-120BB.  They haven't really increased debt load just added to it when earlier bonds have been paid off. 

    The scale still freaks me out a bit but I trust Apple knows what it is doing.

    The other point is that Apple is reducing the share base. This is making each share more valuable in term of percentage of the company.

    Yes, borrowing is exceptionally cheap right now.   But to borrow and then just give it away?
    Had they given it to those 7 million unemployed or about to be evicted it would have done some good.  But they gave it to those who have little need for it.
    George, just give your socialist bullshit a rest will you. 
    DovalBeats
  • Reply 24 of 71
    GeorgeBMacGeorgeBMac Posts: 11,421member
    lkrupp said:
    doggone said:
    I generally do not like companies acquiring debt when they have the capability to pay in cash since it creates a burden that could impact them in the future.  However I do understand that at this time borrowing is exceptionally cheap and makes financial sense to fund paybacks and dividends.

    If you look at Apple's debt history in the last decade, the debt load has been around $100-120BB.  They haven't really increased debt load just added to it when earlier bonds have been paid off. 

    The scale still freaks me out a bit but I trust Apple knows what it is doing.

    The other point is that Apple is reducing the share base. This is making each share more valuable in term of percentage of the company.

    Yes, borrowing is exceptionally cheap right now.   But to borrow and then just give it away?
    Had they given it to those 7 million unemployed or about to be evicted it would have done some good.  But they gave it to those who have little need for it.
    George, just give your socialist bullshit a rest will you. 

    I'm not sure you know what socialist is...  But throwing money away is neither socialist nor capitalist.
  • Reply 25 of 71
    genovelle said:
    I’m not understanding the debt angle. They tend to maintain around 200 million in cash, so why pay interest on debt. Unless it provides tax savings somehow. 
    Cash is worthless due to the rate the FED is printing currency. Buying back their own shares using debt mitigates that problem along with tax advantages 
    Doval
  • Reply 26 of 71
    XedXed Posts: 2,519member
    lkrupp said:
    doggone said:
    I generally do not like companies acquiring debt when they have the capability to pay in cash since it creates a burden that could impact them in the future.  However I do understand that at this time borrowing is exceptionally cheap and makes financial sense to fund paybacks and dividends.

    If you look at Apple's debt history in the last decade, the debt load has been around $100-120BB.  They haven't really increased debt load just added to it when earlier bonds have been paid off. 

    The scale still freaks me out a bit but I trust Apple knows what it is doing.

    The other point is that Apple is reducing the share base. This is making each share more valuable in term of percentage of the company.

    Yes, borrowing is exceptionally cheap right now.   But to borrow and then just give it away?
    Had they given it to those 7 million unemployed or about to be evicted it would have done some good.  But they gave it to those who have little need for it.
    George, just give your socialist bullshit a rest will you. 

    I'm not sure you know what socialist is...  But throwing money away is neither socialist nor capitalist.
    What I don't get is both the hubris for you to decide Apple has no financial sense and your repeated lack of understanding when it comes to simple strategies to grow your valuation.
  • Reply 27 of 71
    crowleycrowley Posts: 10,453member
    lkrupp said:
    doggone said:
    I generally do not like companies acquiring debt when they have the capability to pay in cash since it creates a burden that could impact them in the future.  However I do understand that at this time borrowing is exceptionally cheap and makes financial sense to fund paybacks and dividends.

    If you look at Apple's debt history in the last decade, the debt load has been around $100-120BB.  They haven't really increased debt load just added to it when earlier bonds have been paid off. 

    The scale still freaks me out a bit but I trust Apple knows what it is doing.

    The other point is that Apple is reducing the share base. This is making each share more valuable in term of percentage of the company.

    Yes, borrowing is exceptionally cheap right now.   But to borrow and then just give it away?
    Had they given it to those 7 million unemployed or about to be evicted it would have done some good.  But they gave it to those who have little need for it.
    George, just give your socialist bullshit a rest will you. 
    No, again you misunderstand the socialism that you hate so much.  Apple is not the government, so any money they would choose to give away to social causes would be called charity.
  • Reply 28 of 71
    gatorguygatorguy Posts: 24,176member
    Only $6.5 Billion? Heck, another tech announced this week they've authorized $50 Billion in stock repurchases this year. Makes no real sense to me  but with SO much cash held by the big tech companies and nothing worth spending it on, or that the regulators would approve anyway, I suppose buying back their own stock is essentially all they have left.

    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
  • Reply 29 of 71
    XedXed Posts: 2,519member
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
  • Reply 30 of 71
    gatorguygatorguy Posts: 24,176member
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 
    edited July 2021 GeorgeBMac
  • Reply 31 of 71
    XedXed Posts: 2,519member
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 

    Stock Buy-back announcement is usually followed by an increase in the stock price. The reasons behind the price increase are fairly complex, and involves two major reasons:

    1. Many investors believe that if a company buys back shares, and the number of outstanding shares decreases, the company’s earnings per share goes up. If the P/E (price to earnings-per-share ratio) stays stable, the price should go up. Thus investors drive the stock price up in anticipation of increased earnings per share.
    2. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe). This is the signal company management sends to the market, and the market pushes the stock up in anticipation.
    If you think Apple can't profit from the value of their stock then why suggest they would value from offering a special dividend. If you don't believe that there's a benefit for a company increasing its valuation then I'm not sure there's anything I can say to open your eyes.
    edited July 2021
  • Reply 32 of 71
    flydogflydog Posts: 1,123member
    genovelle said:
    I’m not understanding the debt angle. They tend to maintain around 200 million in cash, so why pay interest on debt. Unless it provides tax savings somehow. 
    Most of that cash is overseas, and would be taxed if repatriated. Also, interest rates are below inflation, so there interest is effectively zero. 
  • Reply 33 of 71
    gatorguygatorguy Posts: 24,176member
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 


    1. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe).
    Apple is not investing in its own stock tho. There is no retained value, the stock gets burned in effect. 

    As far as these repurchases driving up the value of the remaining stock I perfectly understand the theory. The proof is lacking, therefore it's somewhat a leap of faith that you will benefit more from an increased share price later on directly due to a buyback this quarter compared to an identifiable and tangible check distributing those funds directly to you.
    GeorgeBMac
  • Reply 34 of 71
    davidw said:
    genovelle said:
    I’m not understanding the debt angle. They tend to maintain around 200 million in cash, so why pay interest on debt. Unless it provides tax savings somehow. 

    The other angle is that AAPL dividend payout is now about .6% at $145 a share. Which would be near the historic low as AAPL share price is near its historic high. So even now, with the shares Apple buys back, they save .6%, which goes toward paying the interest on the money used for buy backs. Apple do not have to pay out a dividend for the shares they buy back.



    That is an interesting angle that I hadn't heard before.
    So the bond issuance saves on tax rates (cash remains in yet to be taxed investments such a treasuries, plus they keep overseas money overseas until another tax holiday is declared), plus the share buyback (say 4% float reduction for 2021) reduces the amount of dividend to be paid by a rough estimate of about 500 million.

    Taking on the very low interest debt reduces tax payment and reduces cash paid = Apple actually pays less money by borrowing the money versus using their own cash. Somewhere in Apple there are accountants making a lot money :-). 
  • Reply 35 of 71
    XedXed Posts: 2,519member
    gatorguy said:
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 


    1. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe).
    Apple is not investing in its own stock tho. There is no retained value, the stock gets burned in effect. 

    As far as these repurchases driving up the value of the remaining stock I perfectly understand the theory. The proof is lacking, therefore it's somewhat a leap of faith that you will benefit more from an increased share price later on directly due to a buyback this quarter compared to an identifiable and tangible check distributing those funds directly to you.
    Sure they are. Retiring outstanding shares increases the value per share and increases EPS. Although, they never retire all the shares since they use some of these shares to issue to employees.

    The real question for you and George is: Why do you think that the world's most valuable company and inarguably an incredibly successful, profitable, and savvy company does this if the net effect ranges from having no positive effect to harming the company? Could it be that those many thousands of brilliant people working in finance understand something you don't?
  • Reply 36 of 71
    gatorguygatorguy Posts: 24,176member
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 


    1. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe).
    Apple is not investing in its own stock tho. There is no retained value, the stock gets burned in effect. 

    As far as these repurchases driving up the value of the remaining stock I perfectly understand the theory. The proof is lacking, therefore it's somewhat a leap of faith that you will benefit more from an increased share price later on directly due to a buyback this quarter compared to an identifiable and tangible check distributing those funds directly to you.
    Sure they are. Retiring outstanding shares increases the value per share and increases EPS. Although, they never retire all the shares since they use some of these shares to issue to employees.
    I think you're incorrect. To the best of my knowledge not a single repurchased share is retained for redistribution. Not one. They no longer exist, so using my "burned" analogy is apt. POOF! If you're going to find fault with my opinion you should first make sure your own understanding is correct. 

    As far as the repurchase program not having significant value I'm certainly not saying that. At the same time there is no proof that it has, even if "in theory" it should all things being equal, so neither you nor I can be absolutely certain of the dollar value. With a check in hand you would have your proof. 

    EDIT: Personally I get the impression the stock repurchase deals are intended to benefit the largest investors, increasing their voting power. Small guys are in it at the whim and fancy of the big market investment forces far beyond anything you have any control over. You have no voice in it.

    There is often no rational reason for certain stock moves. If/when things crash and burn the largest investors will get along just fine IMO. 
    edited July 2021 muthuk_vanalingam
  • Reply 37 of 71
    davidwdavidw Posts: 2,036member
    gatorguy said:
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 


    1. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe).
    Apple is not investing in its own stock tho. There is no retained value, the stock gets burned in effect. 

    As far as these repurchases driving up the value of the remaining stock I perfectly understand the theory. The proof is lacking, therefore it's somewhat a leap of faith that you will benefit more from an increased share price later on directly due to a buyback this quarter compared to an identifiable and tangible check distributing those funds directly to you.
    Well, publicly traded companies have been buying back their own stocks since there been publicly traded companies. The fact that there're publicly traded companies that are still it doing today, should be proof that buy back works. Otherwise, don't you think that there would be more than enough proof by now, that buy backs don't work? Of course, the milage varies, depending on the company knowing what its doing. I would think that Warren Buffet would had found proof, if buy backs were only a "theory", by now. 

    https://www.cnbc.com/2018/08/31/warren-buffett-explains-the-enduring-power-of-stock-buybacks.html


    And you seem to think that "Apple" is something other than all its shareholders. "Apple" profiting by higher share price later, benefits "Apple" because "Apple" is all of AAPL current shareholders and not the shares that were "burned" (retired).  So by buying back their own shares and "burning" (retiring) them, all of AAPL shareholders share increases in value, as each AAPL share would represent a little bigger piece of the company. (Which is reflected in the earning per share numbers). Plus any increase in the value of AAPL shares, are not taxed until sold. (At least for now.)

    With a dividend, the tax on it for the investor, is immediate. One pay Fed long term capital gains tax on qualified dividend, in the year received. Even if the investor chooses to reinvest their dividend for more shares. So Apple investors (as owners of "Apple") first pay corporate tax on the money used to pay out a dividend and then is taxed again when they receive it. This is why qualified dividend is taxed at the lower long term capital gain rate. The shareholders already paid tax on that dividend, at the corporate level.  (But in high taxed States like CA, all dividend (along with long term capital gains) are treated as ordinary income and taxed at the tax payers marginal tax rate.)  

    Now the opinion of whether "Apple" should spend more on dividend and less on buy backs or vice-versa, depends largely on the investor. As already retired and having a stock portfolio that will more than meet my needs for a comfortable retirement, for the rest of my life, I would tend to prefer a higher dividend pay out. I'm not too worry about increasing the value of my portfolio in the long term. But having some immediate income to supplement my pension, so I don't have to sell any shares, is a major plus for me.

    But young AAPL investors that are still working and maybe more than 10 years away from retirement, might want to see "Apple" buying back more shares, as for them, long term growth is more important than getting a dividend that is immediately taxed. For them, they are not relying on the dividend and most likely reinvesting toward retirement anyway. But they will still be taxed on it and will lose 15% to 25% of the dividend investment value. But with buy backs, they do not get taxed on its reinvestment value until the shares are sold.  

    I would think most institution investors, like mutual funds and pension funds, would prefer more buy backs, over larger dividend pay out. 

    There's got to be a balance when a company like Apple, decides on how much should be allotted toward a dividend payout and how much toward buy backs. It's not a matter of choosing one or the other.  And it's totally ignorant to say that buy backs are a total waste of money. 

    edited August 2021 crowley
  • Reply 38 of 71
    DovalDoval Posts: 40member
    genovelle said:
    I’m not understanding the debt angle. They tend to maintain around 200 million in cash, so why pay interest on debt. Unless it provides tax savings somehow. 
    If somebody tells you that you can pay $1 to borrow $10 and you can use that $10 to make $3, would you not do it?
  • Reply 39 of 71
    DovalDoval Posts: 40member
    genovelle said:
    I’m not understanding the debt angle. They tend to maintain around 200 million in cash, so why pay interest on debt. Unless it provides tax savings somehow. 
    Cash is worthless due to the rate the FED is printing currency. Buying back their own shares using debt mitigates that problem along with tax advantages 
    Bingo, I was wondering why all these people here seems like they have no understanding of the concept using cheap money to create wealth
  • Reply 40 of 71
    DovalDoval Posts: 40member
    davidw said:
    gatorguy said:
    Xed said:
    gatorguy said:
    Xed said:
    gatorguy said:
    IMO actually distributing it to the stockholders in a special dividend would be more direct, assurance of truly getting something tangible instead of simply having faith it made your investment more valuable, but I guess they don't want to get hopes up of an ongoing thing. 
    Buying back the stock is a clear indicator that Apple thinks the stock price is low and/or that they expect something to move the stock higher in the future to make the buyback a lucrative endeavor.
    How would it be a "lucrative endeavor"? That would imply Apple could profit from a higher price later, which they won't. 


    1. No one understands the health of the company better than its senior managers. No one is in a better position to judge what will happen to the future performance of the company. So if a company decides to buy back stock (i.e., decides to invest in its own stock), these managers must believe that the stock price is undervalued and will rise (or so most observers would believe).
    Apple is not investing in its own stock tho. There is no retained value, the stock gets burned in effect. 

    As far as these repurchases driving up the value of the remaining stock I perfectly understand the theory. The proof is lacking, therefore it's somewhat a leap of faith that you will benefit more from an increased share price later on directly due to a buyback this quarter compared to an identifiable and tangible check distributing those funds directly to you.
    Well, publicly traded companies have been buying back their own stocks since there been publicly traded companies. The fact that there're publicly traded companies that are still it doing today, should be proof that buy back works. Otherwise, don't you think that there would be more than enough proof by now, that buy backs don't work? Of course, the milage varies, depending on the company knowing what its doing. I would think that Warren Buffet would had found proof, if buy backs were only a "theory", by now. 

    https://www.cnbc.com/2018/08/31/warren-buffett-explains-the-enduring-power-of-stock-buybacks.html


    And you seem to think that "Apple" is something other than all its shareholders. "Apple" profiting by higher share price later, benefits "Apple" because "Apple" is all of AAPL current shareholders and not the shares that were "burned" (retired).  So by buying back their own shares and "burning" (retiring) them, all of AAPL shareholders share increases in value, as each AAPL share would represent a little bigger piece of the company. (Which is reflected in the earning per share numbers). Plus any increase in the value of AAPL shares, are not taxed until sold. (At least for now.)

    With a dividend, the tax on it for the investor, is immediate. One pay Fed long term capital gains tax on qualified dividend, in the year received. Even if the investor chooses to reinvest their dividend for more shares. So Apple investors (as owners of "Apple") first pay corporate tax on the money used to pay out a dividend and then is taxed again when they receive it. This is why qualified dividend is taxed at the lower long term capital gain rate. The shareholders already paid tax on that dividend, at the corporate level.  (But in high taxed States like CA, all dividend (along with long term capital gains) are treated as ordinary income and taxed at the tax payers marginal tax rate.)  

    Now the opinion of whether "Apple" should spend more on dividend and less on buy backs or vice-versa, depends largely on the investor. As already retired and having a stock portfolio that will more than meet my needs for a comfortable retirement, for the rest of my life, I would tend to prefer a higher dividend pay out. I'm not too worry about increasing the value of my portfolio in the long term. But having some immediate income to supplement my pension, so I don't have to sell any shares, is a major plus for me.

    But young AAPL investors that are still working and maybe more than 10 years away from retirement, might want to see "Apple" buying back more shares, as for them, long term growth is more important than getting a dividend that is immediately taxed. For them, they are not relying on the dividend and most likely reinvesting toward retirement anyway. But they will still be taxed on it and will lose 15% to 25% of the dividend investment value. But with buy backs, they do not get taxed on its reinvestment value until the shares are sold.  

    I would think most institution investors, like mutual funds and pension funds, would prefer more buy backs, over larger dividend pay out. 

    There's got to be a balance when a company like Apple, decides on how much should be allotted toward a dividend payout and how much toward buy backs. It's not a matter of choosing one or the other.  And it's totally ignorant to say that buy backs are a total waste of money. 

    Well said but I have a feeling many of these Haters have zero clue of a thing you said.
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