For a company that supposedly has more cash than it knows what to do with Apple sure raises a lot of debt.
This morning Apple filed with the SEC for a debt offering of an amount TBD. Details are sketchy…
… but based the number of potential “flavors” listed it’s safe to assume the total amount borrowed won’t be insignificant. “Big” is the consensus. $6 to $10b range on Finance Twitter. I’ll guess $12.5, just to be extreme.
These deals are starting to add up for Apple. From 2013 to the end of last year Apple issued $55 billion in debt to fund buybacks and dividends. The rates are low. The company can afford it. For now. So could IBM, back in the day. That hasn’t turned out so well.
I’ve been conducting a one-man jeremiad all year, including about Apple in particular here. The broader fin-media world is starting to pick up the story, as expected. They aren’t quit getting it right.
The issue isn’t what Apple has made or lost repurchasing Apple shares. Apple doesn’t gain or lose anything on their P&L for repurchased stock. No company does. The shares are retired. The problem isn’t that Apple overpaid but that $38b in cash has been laid out in the name of “returning cash to shareholders” since the start of last year and Apple’s stock has been a disaster anyway.
The only semi-justifiable reason for buybacks to using them to hide executive compensation. Remember, I said “semi-justifiable”. Share repurchases keep investors from getting diluted when executives cash out of stock option packages. That’s a good thing. It’s fair. A little oily, but fair.
Other than as a compensation dodge buybacks are economically indefensible. There is nothing wrong with Apple that can be fixed with a share repurchase. The stock is broken because the products are stale. As a long-term shareholder you’d rather they focus on fixing that problem than worrying about dilution.