Few weeks ago Apple gave a statement with the SEC advising shareholders to vote against Carl Icahn’s non-binding advisory share buyback proposal from December. This proposal will be voted on at Apple’s shareholder’s meeting. Icahn published a letter suggesting shareholders for a yes vote on its proposal.
He announced that he purchased additional 500 million dollars in Apple stock, bringing his cumulative sum to 3,6 bilion dollars. Icahn also revealed he surpassed 3 billion in AAPL ownership. He also said on CNBC that his criticism was reserved for Apple’s board of directors and not ins management.
He explains as purchase of Apple’s stock is a “no brainer”, and says Apple’s board should support Apple’s share repurchase program. He states 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.
Bought another $500mil of $AAPL tday, bringing our total to $3.6 billion. If board doesn’t see AAPL’s ‘no brainer’ value we sure do.
— Carl Icahn (@Carl_C_Icahn) January 23, 2014
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