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Apple Inc. Message Board

  • samueldavid1234 samueldavid1234 May 6, 2013 4:20 PM Flag

    AAPL would be silly to blow $17 billion bidding up its own shares because...

    because then they would need to figure out who is going to have the deep enough pockets and the gumption to buy that many shares from AAPL at a price that would need to be higher than whatever AAPL paid in order for AAPL to make a profit. And if AAPL ends up not using the money to buy shares, then why on earth did they borrow money for with interest payments when they have plenty of cash in the bank?

    At the same time, the buyers of the AAPL bonds get a 2% annual return. Wonderful. That's 2% for tying up their money. Now that's not like cash in the bank. If they wanted to cash out immediately, they'd end up losing on the transaction costs. Plus, they'd have to sell at the current bid price which may well be lower than whatever they paid. Throw in the possibility that interest rates on regular cash savings could at some point surpass 2%, making AAPL bonds look that much less attractive, really makes one scratch one's head.

    The only one's I see who made out on this deal were the underwriters.

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    • sparksau79@att.net sparksau79 May 6, 2013 8:25 PM Flag

      First they are retiring equity. Do you know the difference between the cost of debt and the cost of equity? Start there. It's covered in finance 101 but you haven't cracked that book yet.

    • Yeah..Yeah....I said no pickle and hold the mustard!

    • The shares AAPL buys are supposed to be retired, although this is not always the case. AAPL is not buying shares to sell at a later date. They'll simply cancel the shares from the existing share count. They might give a few to executives.

    • Brilliant move for Apple.The bond sale was over subscribed so they all got sold.
      Apple then buys shares back and saves the 3% div payout. They pay the bond holders 2% and save the difference (1%) increasing the cash on hand balance.
      The stock buyback reduces the number of shares thereby increasing the earnings per share. Assuming a constant P/E , the share price goes up.
      Everybody wins!

      • 1 Reply to fatamalle
      • Being "oversubscribed" isn't a proof of anything. Once upon a time most people thought the world was flat. Just because a lot of people say or do something does not prove they are right.
        Next you say that they are buying back shares so as to "retire them." That reminds me of the gimmick that Ty Warner did with Beanie Baby's for a few years--he retired several every few months, hyping the market. The gimmick worked for a while, but what are all those retireed beanies worth today?
        So, you/'re saying that they are borrowing at 2% so that they don't have to pay a (current) 3% dividend to shareholders from their own cash. Wow, such logic. Why don't they just pay the dividends from cash on hand and that way they don't have to pay back the 2% at all?! That is, they are not saving any interest by using their own cash on hand to pay the dividend. The cash they have on hand they owe no interest on and can certainly pay dividends from that. But now they are taking on debt for no necessary reason. This is pure gimmickry, imho.
        Finally, either they are buying shares with the money borrowed or they are paying dividends with it, which is it?

    • dumb post

 
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