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Icahn pressing Apple to spend $150 billon on stock buyback
Activist investor Carl Icahn took to the Internet and the TV airwaves Tuesday to make it clear that he believes Apple isn’t doing nearly enough to boost its stock price, which has fallen by 30 percent from its peak in September 2012.
The Associated Press
SAN FRANCISCO — Activist investor Carl Icahn is pressuring Apple to spend $150 billion to buy back its own stock, a target that would more than double the amount Apple’s board authorized in a previous attempt to placate frustrated shareholders.
Icahn took to the Internet and TV on Tuesday to make it clear he believes Apple isn’t doing nearly enough to boost its stock price, which has fallen by 30 percent from its peak in September 2012.
The slump has turned Apple’s stock into a bargain, Icahn said on the financial-news channel CNBC, making it a “no-brainer” for the maker of the iPhone and iPad to pour more money into its shares.
The Apple board pledged in April to spend $60 billion buying back its stock through the end of 2015. About $18 billion of that had been exhausted through June.
Icahn went public with his demands after making his case to Apple CEO Tim Cook in a Monday dinner hosted at his New York apartment. The face-to-face conversation came seven weeks after Icahn, a billionaire who has built his fortune by investing in out-of-favor companies, disclosed he had bought a significant stake in Apple and signaled he would campaign for changes.
Monday’s three-hour meeting was “cordial,” according to the often-confrontational Icahn, although he said the mood got “testy” when Apple Chief Financial Officer Peter Oppenheimer expressed misgivings about asking the board to reconsider how much the company should be spending on its own stock.
“I said, ‘So what? The board is not God,’ ” Icahn told CNBC. “The board should be listening to what their shareholders want.”
Icahn said Apple agreed to get back in touch in three weeks. Apple spokesman Steve Dowling declined to comment.
“I feel very strongly about this,” Icahn told CNBC. “I can’t promise you the stock will go up and I can’t promise you they are going to do the buyback, but I can promise you that I am not going away until they hear a lot more from me concerning this.”
Icahn, 77, didn’t say what he will do if Apple rejects his ideas. In the past, Icahn has spearheaded shareholder rebellions aimed at ousting corporate boards who spurn him.
Icahn told CNBC he believes Apple’s board is smart and praised Cook for the job he has done since he succeeded company co-founder Steve Jobs two years ago.
Icahn believes the stock will eventually soar again and cited consumer loyalty to Apple’s brand. He considers Apple’s shares currently as cheap as Netflix’s stock when he acquired a nearly 10 percent stake in the Internet video subscription last year for an average price of about $58 per share.
Netflix’s stock is now trading above $320, reaping Icahn a gain of about $1.5 billion.
Investors are evidently hoping Icahn’s crusade will prod Apple to do something to lift its stock. The company’s shares climbed $11.21, or 2.4 percent, to close at $487.96 Tuesday. The stock has gained 4 percent since Icahn got involved.
Icahn told CNBC this fund has invested about $2 billion in Apple so far, but he didn’t reveal how many shares he owns. A $2 billion investment in Apple currently represents about 0.5 percent of the company’s market value of about $444 billion.
The public critiques by Icahn threaten to compound Apple’s headaches.
Apple is trying to regain some market share lost in the mobile computing market during the past year to less expensive smartphones and tablet computers running Google’s free Android software.
The tougher competition has slowed Apple’s growth and decreased the average prices for its iPhones and iPads, trimming the company’s profit margins.
Apple is hoping to bounce back with the recent release of two more iPhones, a high-end model called the 5S and slightly less expensive device called the 5C. Apple said it sold more than 9 million of the new iPhones during their first weekend last month, the fastest start yet for its marquee product line.
Despite the downturn in its stock price, Apple remains the world’s most valuable company. It has about $147 billion in cash, but the company isn’t relying on much of that money to buy back its stock. Instead, the company issued bonds to take advantage of low interest rates, a borrowing tactic Icahn believes Apple should use again to raise even more money for stock buybacks.