Update: The WSJ reports that Apple’s target is to raise $12B, “on the higher side of investor expectations.”
An SEC filing reported by ZeroHedge reveals that Apple has announced plans for a series of new bond issues to raise money for further stock buybacks and dividend payments in what could be a 10-part deal.
General corporate purposes, including repurchases of Apple’s common stock and payment of dividends under the company’s program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt.
MarketWatch adds that the notes will offer floating-rates maturing in 2018 and 2019, and fixed-rates maturing at a range of dates from 2018 all the way through to 2046. Apple has not yet revealed either the rates to be offered or the total sum it plans to raise, but previous issuances suggest we can expect the amount Apple is borrowing to be substantial …
Earlier U.S. bond sales raised $17B in 2013, $12B in 2014 and $8B last year. Apple advised during last month’s earnings report that it had so far executed $153B of its planned $200B stock buyback program.
For those confused about why Apple needs to borrow money when it has $200B in the bank, it’s because most of that money is held overseas, and the company would have to pay hefty taxes in order to repatriate it. It’s far cheaper for it to borrow the money, especially given that its Aa1/AA+ credit rating means that it can afford to offer very low returns.
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Tim Cook, go private or stop feeding the bottomless pit.
At the rates they can borrow who wouldn’t?
True, it is cheaper than using the money they have overseas and tied up in long term investments although recently the ASB Bank/Commonwealth Bank in Australia have reported tightening credit conditions so this might be Tim’s last chance to get some cheap money.
Going private would require more than $600B, maybe close to 7. Where would that come from?
Think more like a trillion dollars. To go “private”, in other words selling Apple the public company to a private company, perhaps one solely owned by Apple’s management. Or perhaps one solely owned by a collection of really rich guys like Steve Balmer and Carl Icahn with a ton of debt owed to dozens of banks, means offering cash to public shareholders in return for their shares. I can’t imaging that many shareholders would hand over their shares at anything close to current prices. I certainly would not. And as you state, it would take more money than any transaction has ever even come close to doing. Literally lining up the financing to make a trillion dollars worth of payments to the public shareholders all basically on one day would be a monumental exercise in financial engineering. You’d have to source those funds from dozens, if not hundreds of banks. And it would seriously stress their cash reserves.
And for the folks saying go private to avoid wall street, that would just mean that Apple would basically be owned and controlled by the consortium of banks that lent the money for the purchase. I don’t think that sounds like a good thing for Apple.
Stock options are a great incentive to retain top talent at Apple. If they go private, they’d have to significantly increase salaries and bonuses. I guess they could potentially do that since you won’t have the board and investors breathing down their neck for higher margins, but you can’t just say “go private” like it’s simple.
You would have the banks that lent the many hundreds of billions of dollars breathing down their necks. And that breath would be a lot hotter than the public shareholders. Basically to go private, Apple would have to buy out current shareholders for something close to $1 trillion. That is my guess of what it would take to get over 90% of all the public shareholders to agree to hand over their shares. It could be much higher than that. Apple would be free of public reports, but now would be saddled with, call it, $800 billion in debt and interest on that debt. And with that debt load this wouldn’t be 1% interest. It would be really significant interest and that money would have to get paid every month.
Bondholders do not have any actual say in how the company is run. They are higher in priority than equity holders in the case of default, but unlike equity holders they do not get to vote and they do not get the upside if the company becomes more valuable in time. About the worst a bondholder can do is threaten to sell his holdings in the market. If the bonds are well priced, that is not much of a threat.
DWise. If Apple issues bonds that are trading on the open market, then that is a public security. So Apple remains public. We are talking about taking Apple private. That would be done with bank debt. You can do privately issued bonds but not at anywhere near the scale to buyout the public shares. Folks here think Apple going private means Tim Cook only answers to himself and the spirit of Apple. But what it really means is that Tim Cook answers to whomever puts up the hundreds of billions necessary to take the company private. And that group will be much better at focusing its energies than the public stockholders if they don’t like what Tim Cook is doing.
I wonder though, maybe rather than going private just keep buying up stock until Apple itself owns 51% of the shares. Wouldn’t they then have the benefit of being publically traded and the freedom of being private?
No, it doesn’t work that way. As long as you have public shareholders you have to meet all of the same rules. You get to select all of the people on the board if you like, but probably you give some of the seats to outside board members that shareholders–at least some of the big ones–help you select.
No. A company can’t vote its own shares to elect its own board. Once the shares are bought back by Apple they are treasury stock and are non-voting and they don’t get to participate in dividends. A company cannot own itself.
9/2013: 6.294 billion shares outstanding, $124 billion equity, $0.44 per quarter dividend,
9/2014: 5.866 billion shares outstanding, $112 billion equity, $0.47 per quarter dividend
9/2015: 5.579 billion shares outstanding, $119 billion equity, $0.52 per quarter dividend
Cash and debt are rising with equity staying fairly constant.
Shares outstanding are declining, as each share is worth more every year.
Dividends are piling up in investor accounts as well.
Hey! That’s my hometown Apple Store! The one we never thought we’ll ever have. Hello Brussels! That’s “the Man from Atlantis” fountain (from Antwerp’s sculptor Luk Van Soom) you can see through the windows. Not the 2 guys on the left. Well, It’s quite ugly, but, hey, it’s art they say…
Is this in Australia too? Because I saw it on the news the other night.
Apple has certainly done a bond issue in Australia before: http://9to5mac.com/2015/08/19/apple-bond-australia/