8 ms·

> "vs the many far more productive things they could conceivably do by spending that money outside the us ..." If there was something productive they could do

by whack 10y ago

> "vs the many far more productive things they could conceivably do by spending that money outside the us ..." If there was something productive they could do with that money, they would have done it already. The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. The money would be far more productive if Apple simply returned it back to its shareholders, who can then invest it in other ventures of their choosing [1]. The only rational reason for Apple to hoard the cash, is in anticipation of a tax holiday. And given the nature of the Trump administration, I wouldn't be surprised at all if Apple manages to buy one. [1]: http://time.com/money/3484599/icahn-letter-apple-cash/ http://time.com/money/3484599/icahn-letter-apple-cash/

krashidov 10y ago
I don't know much about finance. Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend?
- CapitalistCartr 10y ago
  That's what the parent is talking about. Sometimes companies pay out a large, one-time dividend. The other way to pay out to shareholders is to buy back shares on the market. Each approach has its strengths.
- cavisne 10y ago
  Their corporate responsibility is the maximize return to shareholders. If they cant do anything with the money (and seems they cant) they should be returning it with larger dividends, buy backs etc. If they did do something with the money, i wonder if automation is at the stage where they could invest in local supply chains and bring iphone manufacturing to the US. Chinese labour is not as cheap as it used to be, all the parts are still in china for now though.
- justin66 10y ago
  > Why would Apple return money back to its shareholders? They're obligated to obey the wishes of the shareholders, who are the owners of the company. If the shareholders want it, the shareholders get it. (That's assuming the shareholders haven't been suckered into buying shares without voting rights, etc.)
- cowsandmilk 10y ago
  To expand on some other people's comments: Dividends are post-tax and have to be brought back to the US before they are paid out. Apple has a whole bunch of money sitting overseas that it has not paid taxes on. So, if Apple brings it back to pay to shareholders as a dividend, 40% goes to the US government and 60% to shareholders. Let's say Trump tells Apple (and other companies) they can bring the money back with a 10% tax. Now, the shareholders get 90% of the money as a dividend, which is 1.5X the 60%. In order to pay dividends and not pay taxes, Apple has actually gone the route of borrowing money. So, they borrow money in the US and pay a low interest rate while their cash sits overseas.
  - dzhiurgis 10y ago
    > In order to pay dividends and not pay taxes, Apple has actually gone the route of borrowing money. So, they borrow money in the US and pay a low interest rate while their cash sits overseas. Wow really. That's clever but also weird. Don't they sustain themselves US being largest market?
  - deleted 10y ago
    [deleted]
  - eridius 10y ago
    > Apple has a whole bunch of money sitting overseas that it has not paid taxes on. To clarify: they haven't paid US taxes on it. They've paid whatever taxes are levied by the foreign countries they're operating in, but the US also double-taxes that same money if it's brought back into the US.
    - kilotaras 10y ago
      I may be wrong but my understanding is US taxes the difference between foreign and domestic tax rates.
    - DanielBMarkham 10y ago
      Also once they pay tax (again) on it to get it into the U.S., it gets taxed a third time if they distribute it to the shareholders.
- nebabyte 10y ago
  > Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend? Did you read the post?
prklmn 10y ago
> The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. That's not true. It's not all cash and most likely is mostly not cash. They report it as being cash and cash equivalents. http://www.zerohedge.com/news/2015-07-23/worlds-biggest-hedge-fund-30-billion-bigger-bridgewater-remains-mysterious-ever http://www.zerohedge.com/news/2015-07-23/worlds-biggest-hedg...
- RhodesianHunter 10y ago
  Zero Hedge is the Breitbart of economic news. I'm not saying you're wrong, but using them as your source does not win you any points.
  - prklmn 10y ago
    I agree with you, but they had the most informative article on this topic.
- TuringNYC 10y ago
  When companies say "cash", it is not physical cash, but cash in the bank. It may not even be in a bank, but may be in money-market funds. It is usually stashed away in highly-liquid money market funds which return slightly more interest than the bank would.
jakewins 10y ago
They are returning it to stock holders - however, it is not tax efficient to do this by simply paying dividends with profits. By offshoring the money they can minimize taxes, and still pay stock holders by taking massive loans with the cash hoard as security, effectively repatriating the money without paying taxes. As an aside, they are not mainly paying dividends to get this money to stock holders. Pushed heavily by large Apple owners like Icahn, apple is buying back it's own stock - effectively paying dividends by raising the stock price. I don't recall the exact details why, but somehow that ends up also being more tax efficient. Eg: https://www.google.com/amp/s/www.forbes.com/sites/antoinegara/2016/02/16/apple-readies-itself-for-a-new-debt-fueled-stock-buyback/amp/ https://www.google.com/amp/s/www.forbes.com/sites/antoinegar... Source: https://www.amazon.com/dp/B014BR46P2/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/dp/B014BR46P2/ref=dp-kindle-redirect?...
- TuringNYC 10y ago
  Buy-backs are more tax efficient because they increase stock price. Stock price increases are not taxed until they are realized, so it is beneficial to long-term stockholders who may not sell for many years, possibly not for decades. Dividends are taxed in the year of payment, so investors lose some of that gain within a year. On the flip side, buy-backs can be a poor way to spend cash, as companies might buy back at high stock prices. So the third way to reward the stockholder is to just keep that cash stashed in a bank account -- you get neither taxed (dividends) nor do you buy back potentially inflated shares. However, you have the cash stashed away to do either if you ever need to, or find a good opportunity to (e.g., stock price slump.)
  - portent 10y ago
    Personally I don't understand why a buy-back should increase stock price. Sure, there are fewer shares - but the value of the company has gone down (it has less free cash, i.e. fewer assets) and the two effects should exactly offset each other.
    - mgolawala 10y ago
m3kw9 10y ago
How is returning money to investors so investors can invest somewhere else be productive in the Apple sense? If they acted on that reasoning they would do donations
Osiris 10y ago
Why do people always suggest that shareholders should be the first to benefit from company profits? Shareholders don't do anything to create value. Apple doesn't benefit at all when someone buys or sells their shares. Why do companies not disburse excess profits like this to those that were responsible for creating the value in the first place?
- deleted 10y ago
  [deleted]
- ethbro 10y ago
  Because ultimately shareholders (barring kooky Google stock arrangements) own the company. Practically, they select board members (Apple recently added the "3%+ stakeholders may nominate new members" clause), who select the CEO, who would propose and implement such a scheme. So distributing it to employees, while noble and just (imo) would require shareholders to vote against their own immediate interests. In practice, there's probably some friction, but you can damn well believe with numbers this large Tim Cook would be sued in a heartbeat if he attempted to implement such a scheme.
- portent 10y ago
  Here you are confusing the secondary market for shares (an existing shareholder selling to someone else) with the primary market (new issuance of shares). The primary market for shares absolutely benefits companies by giving them large amounts of cash now, in return for a claim on future earnings. This can allow a company to create more value than it otherwise would be able to do. The secondary market is mainly a benefit to shareholders, not companies; but without a liquid secondary market, there would be fewer people willing to invest in the primary market.
- kgwgk 10y ago
  Shareholders are not the first to benefit, they are the last to benefit. Profits are by definition what remains after everyone else has taken their part, if anything.
- valuearb 10y ago
  Try creating value without shareholders. Most companies would exist, or wouldn't be as successful, without them. Jobs + Woz created the Apple II, investors funded inventories, production, marketing, and everything else.
pfarnsworth 10y ago
The tax holiday is probably the only good thing a Trump administration could do at this point.
- deleted 10y ago
  [deleted]
tn135 10y ago
I hope Apple gets that tax holiday. It is Apple's money that they want to keep themselves. Ideally government should have pro actively worked to give them a tax break.

by whack 10y ago

krashidov 10y ago

I don't know much about finance. Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend?

CapitalistCartr 10y ago
That's what the parent is talking about. Sometimes companies pay out a large, one-time dividend. The other way to pay out to shareholders is to buy back shares on the market. Each approach has its strengths.
cavisne 10y ago
Their corporate responsibility is the maximize return to shareholders. If they cant do anything with the money (and seems they cant) they should be returning it with larger dividends, buy backs etc. If they did do something with the money, i wonder if automation is at the stage where they could invest in local supply chains and bring iphone manufacturing to the US. Chinese labour is not as cheap as it used to be, all the parts are still in china for now though.
justin66 10y ago
> Why would Apple return money back to its shareholders? They're obligated to obey the wishes of the shareholders, who are the owners of the company. If the shareholders want it, the shareholders get it. (That's assuming the shareholders haven't been suckered into buying shares without voting rights, etc.)
cowsandmilk 10y ago
To expand on some other people's comments: Dividends are post-tax and have to be brought back to the US before they are paid out. Apple has a whole bunch of money sitting overseas that it has not paid taxes on. So, if Apple brings it back to pay to shareholders as a dividend, 40% goes to the US government and 60% to shareholders. Let's say Trump tells Apple (and other companies) they can bring the money back with a 10% tax. Now, the shareholders get 90% of the money as a dividend, which is 1.5X the 60%. In order to pay dividends and not pay taxes, Apple has actually gone the route of borrowing money. So, they borrow money in the US and pay a low interest rate while their cash sits overseas.
- dzhiurgis 10y ago
  > In order to pay dividends and not pay taxes, Apple has actually gone the route of borrowing money. So, they borrow money in the US and pay a low interest rate while their cash sits overseas. Wow really. That's clever but also weird. Don't they sustain themselves US being largest market?
- deleted 10y ago
  [deleted]
- eridius 10y ago
  > Apple has a whole bunch of money sitting overseas that it has not paid taxes on. To clarify: they haven't paid US taxes on it. They've paid whatever taxes are levied by the foreign countries they're operating in, but the US also double-taxes that same money if it's brought back into the US.
  - kilotaras 10y ago
    I may be wrong but my understanding is US taxes the difference between foreign and domestic tax rates.
  - DanielBMarkham 10y ago
    Also once they pay tax (again) on it to get it into the U.S., it gets taxed a third time if they distribute it to the shareholders.
nebabyte 10y ago
> Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend? Did you read the post?

prklmn 10y ago

> The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. That's not true. It's not all cash and most likely is mostly not cash. They report it as being cash and cash equivalents. http://www.zerohedge.com/news/2015-07-23/worlds-biggest-hedge-fund-30-billion-bigger-bridgewater-remains-mysterious-ever http://www.zerohedge.com/news/2015-07-23/worlds-biggest-hedg...

RhodesianHunter 10y ago
Zero Hedge is the Breitbart of economic news. I'm not saying you're wrong, but using them as your source does not win you any points.
- prklmn 10y ago
  I agree with you, but they had the most informative article on this topic.
TuringNYC 10y ago
When companies say "cash", it is not physical cash, but cash in the bank. It may not even be in a bank, but may be in money-market funds. It is usually stashed away in highly-liquid money market funds which return slightly more interest than the bank would.

jakewins 10y ago

They are returning it to stock holders - however, it is not tax efficient to do this by simply paying dividends with profits. By offshoring the money they can minimize taxes, and still pay stock holders by taking massive loans with the cash hoard as security, effectively repatriating the money without paying taxes. As an aside, they are not mainly paying dividends to get this money to stock holders. Pushed heavily by large Apple owners like Icahn, apple is buying back it's own stock - effectively paying dividends by raising the stock price. I don't recall the exact details why, but somehow that ends up also being more tax efficient. Eg: https://www.google.com/amp/s/www.forbes.com/sites/antoinegara/2016/02/16/apple-readies-itself-for-a-new-debt-fueled-stock-buyback/amp/ https://www.google.com/amp/s/www.forbes.com/sites/antoinegar... Source: https://www.amazon.com/dp/B014BR46P2/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/dp/B014BR46P2/ref=dp-kindle-redirect?...

TuringNYC 10y ago
Buy-backs are more tax efficient because they increase stock price. Stock price increases are not taxed until they are realized, so it is beneficial to long-term stockholders who may not sell for many years, possibly not for decades. Dividends are taxed in the year of payment, so investors lose some of that gain within a year. On the flip side, buy-backs can be a poor way to spend cash, as companies might buy back at high stock prices. So the third way to reward the stockholder is to just keep that cash stashed in a bank account -- you get neither taxed (dividends) nor do you buy back potentially inflated shares. However, you have the cash stashed away to do either if you ever need to, or find a good opportunity to (e.g., stock price slump.)
- portent 10y ago
  Personally I don't understand why a buy-back should increase stock price. Sure, there are fewer shares - but the value of the company has gone down (it has less free cash, i.e. fewer assets) and the two effects should exactly offset each other.
  - mgolawala 10y ago

m3kw9 10y ago

How is returning money to investors so investors can invest somewhere else be productive in the Apple sense? If they acted on that reasoning they would do donations

Osiris 10y ago

Why do people always suggest that shareholders should be the first to benefit from company profits? Shareholders don't do anything to create value. Apple doesn't benefit at all when someone buys or sells their shares. Why do companies not disburse excess profits like this to those that were responsible for creating the value in the first place?

deleted 10y ago
[deleted]
ethbro 10y ago
Because ultimately shareholders (barring kooky Google stock arrangements) own the company. Practically, they select board members (Apple recently added the "3%+ stakeholders may nominate new members" clause), who select the CEO, who would propose and implement such a scheme. So distributing it to employees, while noble and just (imo) would require shareholders to vote against their own immediate interests. In practice, there's probably some friction, but you can damn well believe with numbers this large Tim Cook would be sued in a heartbeat if he attempted to implement such a scheme.
portent 10y ago
Here you are confusing the secondary market for shares (an existing shareholder selling to someone else) with the primary market (new issuance of shares). The primary market for shares absolutely benefits companies by giving them large amounts of cash now, in return for a claim on future earnings. This can allow a company to create more value than it otherwise would be able to do. The secondary market is mainly a benefit to shareholders, not companies; but without a liquid secondary market, there would be fewer people willing to invest in the primary market.
kgwgk 10y ago
Shareholders are not the first to benefit, they are the last to benefit. Profits are by definition what remains after everyone else has taken their part, if anything.
valuearb 10y ago
Try creating value without shareholders. Most companies would exist, or wouldn't be as successful, without them. Jobs + Woz created the Apple II, investors funded inventories, production, marketing, and everything else.

pfarnsworth 10y ago

The tax holiday is probably the only good thing a Trump administration could do at this point.

deleted 10y ago
[deleted]

tn135 10y ago

I hope Apple gets that tax holiday. It is Apple's money that they want to keep themselves. Ideally government should have pro actively worked to give them a tax break.