Today activist investor Carl Icahn indicated on Twitter that he has amassed “a large position” in the computing giant Apple. Following, in another tweet, he stated that in a conversation with current Apple CEO, he had “discussed [his] opinion that a larger [stock] buyback should be done now.”
Another conversation would follow, the tweet went on to say.
Icahn’s twin Twitter missives have sent Apple’s stock 4 percent higher, adding more than $10 billion to the company’s market capitalization. What Icahn is pressing for is that Apple deploy more of its tectonic cash reserves to repurchase its shares from the public.
This would concentrate future per-share earnings on remaining outstanding shares in the company, raising their per-unit value. Icahn, naturally, owns many of those shares. Thus, the value of his claimed “large” stake in Apple would increase, boosting his personal wealth.
If this sounds awfully familiar, you merely have a good memory. What Icahn is proposing here, or perhaps demanding, is similar to what he proposed for Dell: That the company tender a higher per-share price for nearly all the company’s public equity, greatly boosting the per-share incomes of the shares that he would control. It was a great idea, for Icahn.
What’s somewhat humorous about all of this is that with a mere two tweets, Icahn moved billions in market value. I wouldn’t think that Apple is too excited to see its private discussions put into the public record in this fashion.
Apple currently pays a cash dividend of more than $3 per share, and in its most recent quarterly earnings report stated that it was “pleased to have returned $18.8 billion in cash to shareholders through dividends and share repurchases.”
Icahn wants more, and Apple can afford it. The issue at hand is that much of Apple’s cash is overseas, and thus expensive to use here. If Apple repatriates the funds, they will be charged the full U.S. corporate tax rate. However, the company found a way around the issue earlier this year, floating a $17 billion bond measure that will, to quote Reuters, fund its “ambitious program that will return $100 billion in cash to holders of Apple shares.”
$18.8 billion thus far, out of a coming $100 billion, and Icahn wants to step on the gas. It’s up to Cook now. Investors, for the time being, are optimistic.
Top Image Credit: m:eightysix