Posted on 05/03/2017 4:38:21 PM PDT by mdittmar
Apple CEO Tim Cook said that his company will start a $1 billion fund to promote advanced manufacturing jobs in the United States.
"We're announcing it today. So you're the first person I'm telling," Cook told "Mad Money" host Jim Cramer on Wednesday. "Well, not the first person because we've talked to a company that we're going to invest in already," he said, adding that Apple will announce the first investment later in May.
The fund comes as President Donald Trump has made bringing back manufacturing jobs a big part of his agenda, and it fits into Apple's larger effort to create jobs across its spectrum, from its own employees to app developers to its suppliers.
(Excerpt) Read more at cnbc.com ...
You don't want investors to be repaid? You obviously have no clue about economics. Apple has paid back $175 Billion out of EARNINGS and will do the SAME with the additional $35 BILLION in the buy back of stock (which is money invested in stock that investors BOUGHT) and at the same time AMASSED $250 BILLION more that belongs to Apple that has already had income tax paid on it. . . as has the money being used to buy back shares and pay dividends. THAT IS IMPRESSIVE.
That $1 billion is larger than the individual profits of a good portion of the Fortune 500 companies. . . and you find that "unimpressive?" In fact, it's larger than the REVENUE of a good size fraction of those 500.
You don't want investors to be repaid?One billion to investment, 210 billion to stock repurchases . . . unimpressive.
In reality most of the $210 billion which Apple will pay to investors in AAPL when those investors sell their shares will be re-invested in other stocks, bonds, etc. It’s what investors tend to do.Point being, that Apple management itself - by buying its stock rather than (in its IPO and other public offerings, if any) selling its stock is admitting that it doesn’t see great investment opportunities in its own business which justify Apple investing that $210 billion in them.
If it did, it would simply invest the money in its business - in the US, or elsewhere. Since it does not, it is outsourcing the decisions on how that money will be invested to the investors who were smart enough to invest in AAPL.
No one of those individual investment decisions is likely to be a $1B headline grabber, tho, so mrsmith will be able to retain his smug attitude of superiority over AAPL. Notwithstanding that
- he cannot raise $210B in the first place, because
- he would have no idea how to profitably invest that kind of money if he did have it.
The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
What do you think that money goes to? It doesn't disappear. You are misinterpreting what is going on. Apple cannot "Invest in itself by buying AAPL stock" with the purpose of earning anything in the stock market, nor can Apple Pay itself dividends. That's taking money out of one pocket and putting it back in the same pocket..
What do you mean, "buy its stock rather than selling its stock Is admitting that it doesn't see great investment opportunities in its own business which justify Apple investing that $210 billion in them?" CinC,That is EXACTLY what Apple is doing. They are investing that $210 billion in themselves by buying BACK their outstanding shares. They are INVESTING IN THEMSELVES. What do you think a company does when it goes private? It buys back every single outstanding share! Apple is essentially buying back shares it sold at some time in the past. It cannot do anything with its own shares except buy them back or sell more from shares already authorized to be sold by the board of the directors to raise money for expansion. Apple, since it has a huge pile of money, has no need to raise money, so it is using some of that money to buy itself back from the investors.
Apple can only buy back and retire the outstanding shares, i.e. destroy them, or put them in a safe to be resold if the Board of Directors decides to keep those shares still authorized. THAT is what Apple's management is doing.
By doing so, Apple will no longer be required to pay dividends on those re-purchased shares in the future. By buying back those shares, each outstanding share increases in value as each share is less diluted by some small percentage.
For example, assume a company authorizes the creation of 1000 shares and the sale of 500 of them to raise capital. The 500 shares are sold for $10 a share and the company sells half of itself for $5000. The corporation retains the other half of the shares. Book value of the shares is $10,000. The shares start trading on the market and they go up. Over the years the company authorizes more shares, and prints more. . . the board of directors authorizes another 1000 shares and issues a two for one spit, so that ever one who has one share now has two shares and the corporation sells 500 of the shares from its split. . . but each share is now diluted because there can be 2000 owners of the company instead of the original 1000 potential owners. This goes on and on through splits and sometimes non-splits as the company's board authorizes the issuance of more stock to add to the value of the company that benefits all stockholders through added value, but dilutes their shares.
A company can return an investment by stockholders in two ways, by paying dividends, or by buying back the stock at current market value or by offering some price above market price. The latter is usually used when a company is being taken private and all outstanding shares are being re-purchased and trading is being stopped. Dell Computer went private about ten years ago by repurchasing all of its outstanding shares. IIRC, they offered ~40% above market price. BestBuy took itself private the year before Dell.
The more stock outstanding the more the company has to pay in dividends when a dividend is declared. By repurchasing shares, that division of profits is reduced or alternately, each shareholder gets a larger dividend because the pot of profits is shared among fewer shareholders because the profits are less diluted. By buying back shares, the company makes the outstanding shares more desirable and therefore increases the market price. That's the Law of Supply and Demand at work. Apple has reduced the number of outstanding shares by approximately 20% over the last four years or so, thereby increasing the value of all of the outstanding shares by reducing their dilution for their owners. i.e. returning capital to each and every stockholder in addition to those who took advantage of selling their shares on the market because Apple was buying AAPL which also had a positive price pressure on AAPL.
Apple management is saying the exact opposite of what you claim; Apple management is actually saying the BEST place they can invest that $210 Billion is in Apple, otherwise they WOULD leave those shares outstanding and have invested that $210 Billion elsewhere.
If Apple had just kept the $210 billion, it would have $466 Billion in cash. As it is, Apple now just has more cash on hand that the UK and Canada combined.
SM, all due respect and I know you have an Econ degree. And I know that AAPL isn’t the first company to use the logic that “our company is the best investment out there, so we’ll buy our stock.” Management of the company I (subsequently) retired from used that same logic. And it bothered me. A lot.I thought about it, and my conclusion is as I described in Reply #22. If our management thought that they had a huge growth opportunity in its core business, they should have been selling company stock - and investing whatever capital they had in plant and equipment to exploit that opportunity.
“Investing” in your own stock decreases the supply of that stock in the market, and increasing earnings per share without increasing earnings. But, of course, it does zilch to increase earnings. It lessens the capital in your company. Afterward, the Earnings per share are higher, so the price per share of the outstanding stock stands to be higher.
But overall, the company is smaller. In the limiting case, you buy back all shares - and, in so doing, sell off all assets to buy back that last share. Now of course those assets do not disappear, and you could be “taking the company private” in the process - whereby the company name and assets go into private ownership. But the public corporation which initially founded the company is extinguished in the process.
That’s the way I see it . . .
The other way of looking at it would be to say that if the market values your company at $500B including $200B of cash in hand, and the company divests itself of the $200B cash in hand, will the market cap of the company not then immediately revert from $500B to $300B?IMHO the logic is inescapable - the corporation is smaller after the divestiture. Notwithstanding that the price of a single share of the corporation’s stock is, presumably, enhanced.
For myself, the preferable form of the divestiture might better be simply to declare a huge extraordinary dividend.
Either way, the overall effect is for the management of AAPL to relinquish control of all that capital, leaving its disposition to the discretion of the investors who presently own AAPL stock.
A fanatic Apple lover, of course, would be ‘impressed’ by someone ONLY spending 99.5+% of their cash on Apple products.
One gets the silliest (self-parodying) responses from some on Apple threads.
Oh well. I don’t usually participate but had just seen the other CNBC article and had a good laugh.
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