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Carl Icahn publishes open letter to Tim Cook, requests Apple increase buyback through tender offer (U: Apple statement)

Tim Cook

High-profile investor and Apple shareholder Carl Icahn has published an open letter to Apple CEO Tim Cook urging him to once again increase its share repurchase program for stock holders. Citing strong iPhone 6 sales and predicting the larger devices will help Apple gain marketshare from Android, Icahn is requesting Cook and Apple’s board make a tender offer to increase its current rate of share repurchases. Icahn said he thinks Apple remains “dramatically undervalued in today’s market,” but didn’t suggest a specific number for the increased buybacks:

Therefore, given the persistently excessive liquidity of $133 billion net cash on Apple’s balance sheet, we ask you to present to the rest of the Board our request for the company to make a tender offer, which would meaningfully accelerate and increase the magnitude of share repurchases. We thank you for being receptive to us the last time we requested an increase in share repurchases, and we thank you in advance now for any influence you may choose to have communicating to the rest of the Board the degree to which a tender offer would have a positive impact on an EPS basis for all shareholders… We think a tender offer is simply a good method of conducting a large repurchase in an expedited timeframe, but the exact method and the exact size is not the key issue for us. We are simply asking you to help us convince the board to repurchase a lot more, and sooner. We feel compelled to do so because we forecast such impressive earnings growth over the next few years, and therefore we believe Apple is dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit from that earnings growth.

In order to combat any potential controversy that might arise from the request, Icahn commits not to tender any of his own company’s shares if Apple were to make the requested tender offer. “To preemptively diffuse any cynical criticism that you may encounter with respect to our request, which might claim that we are requesting a tender offer with the intention of tendering our own shares, we hereby commit not to tender any of our shares if the company consummates any form of a tender offer at any price.”

Icahn’s open letter also includes his updated forecasts for growth among Apple’s various product categories for the years to come. In addition to strong growth expected for iPhone, iPad and Mac, Icahn said he expects an “UltraHD TV set in FY 2016” will represent a large opportunity for the company. Icahn claims that through his analysis he thinks Apple should be trading at $203 per share today and noted that “the disconnect between that price and today’s price reflects an undervaluation anomaly that will soon disappear.” 

(1) given the earnings growth we forecast for Apple, we continue to think that the market misunderstands and dramatically undervalues Apple and (2) the excess liquidity the company continues to hold on its balance sheet affords the company an amazing opportunity to take further advantage of this valuation disconnect by accelerating share repurchases.

Icahn’s letter can be read in full here.

Update: Apple statement via CNBC:

We always appreciate hearing from our shareholders. Since 2013, we’ve been aggressively executing the largest capital return program in corporate history. As we’ve said before, we will review the program annually and take into account the input from all of our shareholders.

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Comments

  1. PMZanetti - 9 years ago

    Icahn is a shit, that has ruined more than one company.

    • TechSHIZZLE.com - 9 years ago

      Exactly. He needs to stay out of the way and let Tim run the company.

      These obvious attempts at stock manipulation are way out of line.

      • If he manipulates the stock UPWARD, I’m all for it, because there are a lot more people constantly trying to manipulate it downward or to keep it static. Apple is insanely undervalued compared to other tech companies, never mind when looking forward.

      • TechSHIZZLE.com - 9 years ago

        @Bruno: the problem is that if Apple doesn’t do what Icahn wants, then i looks bad and the stock price suffers.

        If Icahn wants to have a say in how the company is run, maybe he should try to get on the Board. Until then he needs to STFU and count his money.

        Icahn has no interest in what’s good for the company-he only cares about what’s good for him. And those 2 interests are not usually the same.

      • trinities - 9 years ago

        HAHAHAHAHA I still remember the comments on the rumors that GTAT would be supplying Sapphire screen for iPhone 6 like : “OMG I´m going all in on the GTAT stock!” Lmao… I didn´t good choice

    • jerryfromcan - 9 years ago

      Everyone I see his name attached to anything I bristle.

    • jerjuan (@jerjuan) - 9 years ago

      Icahn is the douchebag of all douchebags! This guy could give a crap less what happens in his wake, so long as he profits. Just look to Las Vegas and his purchase / handling of the Fontainebleau. While the Las Vegas strip struggles to recover and move forward, the north end of the strip sits vacant because no one wants to put a development across from a property that has no plans to finish after first beginning construction almost 7 years ago! The LAST THING Apple needs to do is listen to that guy!

      • jerjuan (@jerjuan) - 9 years ago

        I hope Mr. Cook round filed his letter without opening as soon as he noticed who the sender was!

  2. PoliBerla (@Polidalberg) - 9 years ago

    WTF is This Carl Icahn guy, WTF is buyback and WTF is tender offer?

  3. iphonenick (@iphonenick) - 9 years ago

    I was about to bash Icahn’s latest attempt at stock manipulation for personal gain, but his pledge to not tender his own shares surprised me.

    • jerjuan (@jerjuan) - 9 years ago

      It shouldn’t…. he keeps his shares or increases his holdings he gains more when Apple pays dividends or as stock price increases… A larger ownership percentage also gives him more power to persuade the board to do what he wants. Given the short 5yr out look, Apple is going no where except for up unless they do something HUGE to screw up. Icahn owns approx. 1% of Apple.

      • jerjuan (@jerjuan) - 9 years ago

        Add a little more to the perspective…. In 2011 Steve Jobs owned approx. 5.5 million shares of Apple. Carl Ichan owns approx. 53 million shares.

  4. PMZanetti - 9 years ago

    See this is what I can’t stand…Apple has made a public statement (reply) already….because of the sheer weight of Icahn’s ability to manipulate the market with his “suggestions”.

  5. The problem is that the share price is likely to REMAIN undervalued. Long-term it could significantly pay off for Apple, but if you’re like me, and want to see it affect your own balance sheet, you want the price to move now. :)

    The street won’t invest simply because iPhone 6 gains some points against Android. When the media buries the truth, performance doesn’t mean much. Most investors, like Android buyers are sheep. To add value to the shares we need high profile, high traction influencers to pump Apple’s wall street rep.

  6. leifashley - 9 years ago

    Ican’t lol

    Look, I have Apple stock, and I’d far prefer Tim tell them to get bent and focus on products and experience. Apple isn’t low on cash so why bother?

    It only benefits Icahn…

  7. Taste_of_Apple - 9 years ago

    Icahn gives me a headache.

  8. Don’t indulge this dip #@$%, Carl only does what’s good for himself, not the company.

    As a shareholder I say do the opposite of what Carl wants.

  9. Kevin Rye (@RyeMAC3) - 9 years ago

    Icahn needs to stop telling Apple how to run their business. He’s just out to line his pockets.

  10. Kawaii Gardiner - 9 years ago

    What I think is more pathetic is Icahn on CBNC trying to claim a ‘moral high ground’ when talking about Andreessen – Icahn trying to make himself out as some sort of ‘knight in shining armour’ for shareholders when in reality Tim should tell Carl to sell his stock and invest in a company willing to bend over and do what ever he wants. Someone needs to remind Carl that he is a shareholder amongst many others and if he doesn’t like the direction then he should shut up, sell up and go some where else.

  11. jerjuan (@jerjuan) - 9 years ago

    The title of this article should be….”Carl Icahn requests Apple pay his capital gains tax on $1 billion”.

  12. fredhstein - 9 years ago

    Well said, PED. Carl may be deflecting criticism about his loses on Chesapeak, while setting the expectation of making $5B more (??) on Apple as it goes to $203.
    Still, with stock price appreciation and dividends Carl’s looking at $500M in annual gains in Apple for a while.

  13. fredhstein - 9 years ago

    Herre’s a funny. Carl wants to own 1% of AAPL.
    But rather than spend his $707M to buy another 7M shares, he wants Apple to buy 700M shares.
    Hint Apple will get 1/2 way there soon enough.

Author

Avatar for Jordan Kahn Jordan Kahn

Jordan writes about all things Apple as Senior Editor of 9to5Mac, & contributes to 9to5Google, 9to5Toys, & Electrek.co. He also co-authors 9to5Mac’s Logic Pros series.