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01-23-2014, 02:41 PM #1
Carl Icahn Publishes a Letter to Shareholders Advocating For a Yes Vote on its Proposal
Apple previously filed a statement with the SEC advising shareholders to vote activist investor Carl Icahn’s non-binding “advisory” share buyback proposal from early December. This proposal will be voted on by shareholders at Apple’s stockholder’s meeting, which is to be held at Apple’s headquarters at some point in the next couple of months. Today, Icahn published a seven-page letter to shareholders advocating for a yes vote on its proposal.
Icahn also announced that he purchased another $500 million in Apple stock today, bringing his cumulative total to $3.6 billion. Just recently, Icahn revealed that he had surpassed $3 billion in AAPL ownership. He also stated on CNBC that his criticism was reserved for Apple’s board of directors and not its management.
In his letter, Icahn explains his belief that Apple’s stock is a “no brainer” to purchase and that Apple’s board should be supportive of a significant increase in Apple’s share repurchase program. He argues that Apple’s stock, which is currently priced at $555 would be priced at $840 if its price to earnings ratio was the same as the average P/E across the S&P 500.
We believe, however, that this share repurchase authorization can and should be even larger, and effectuating that for the benefit of all of the company’s shareholders is the sole intention of our proposal. The company has recommended voting against our proposal for various reasons. It seems to us that the basis of its argument against our proposal is that the company believes, because of the “dynamic competitive landscape” and because its “rapid pace of innovation require[s] unprecedented investment, flexibility and access to resources”, it does not currently have enough excess liquidity to increase the size of its repurchase program. Assuming this indeed is the basis for the company’s argument, we find its position overly conservative (almost to the point of being irrational), when we consider that the company had $130 billion of net cash as of September 28, 2013 and that consensus earnings are expected to be almost $40 billion next year. Given this massive net cash position and robust earnings generation, Apple is perhaps the most overcapitalized company in corporate history, from our perspective.
Source: SEC via Carl Icahn (Twitter)
01-23-2014, 03:09 PM #2
"...for the benefit of all of the company’s shareholders is the sole intention of our proposal."
His proposal is meant to benefit only one person, and that is the person with the 3.6 billion dollar stake that will double if Apple does what he wants them to do.
01-23-2014, 03:19 PM #3
01-23-2014, 04:53 PM #4
01-23-2014, 05:03 PM #5
01-23-2014, 06:18 PM #6
If anybody with considerably less money than Icahn tried pumping and dumping, they'd go to jail. Gotta luv the equality in our society!
01-23-2014, 08:36 PM #7
Icahn's proposal is based on flawed logic. Apple is a multi-national corporation with money divided throughout various regional holding companies due to national and international tax laws. Because much of Apple's money is expatriated from the United States, they'd incur severe penalties in the form of taxes to repatriate the money, which would be required if they were going to use such cash to repurchase their own US-based stock. As it is, Apple is using a debt financing program to fund the repurchase they've already authorized. The more domestic cash Apple pumps into repurchasing, the less they potentially have for domestic cash flow - domestic inventory, domestic store openings, domestic hiring, domestic R&D costs. Icahn's proposal could, as Apple has pointed out in their plea to have shareholders vote against it, cause Apple significant negative impact on operations, particularly within the confines of the United States.
01-24-2014, 08:49 AM #8