7 ms·

> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere this is exactly what

by andylei 15y ago

> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it. > In reality Apple could probably just become a private company by buying back most/all the public shares no it couldn't. it's market cap is 550B. it's cash reserve is 100B. more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X. edit: a factor of 10

eugenegamma 15y ago
You're off by a factor of 10 there but the claim is still true.
namsral 15y ago
> the market cap on that company would be > $X. Market cap != Value assets The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.
- andylei 15y ago
  if the market cap of the company fell below the cash (net of debt obligations) of that company, the investors could liquidate the company, take the cash, and make a profit. thus, it's pretty atypically for market cap to dip below asset value, and even more atypical for market cap to dip below cash holdings.
  - namsral 15y ago
    Apple came pretty close in 1997 when they had $380 in cash and a market cap of 2.2B but their LT debt was growing fast. ~1B at the time. Source: http://www.businessweek.com/1997/34/roster34/aapl.htm http://www.businessweek.com/1997/34/roster34/aapl.htm
  - karamazov 15y ago
    Actually, finding companies whose market cap is less than asset value is a great way of insuring you're buying shares at a discount. This is pretty rare in technology companies, which are generally valued far above assets, but it's possible to find this sort of thing in more predictable sectors. For more information, you could look at Benjamin Graham's "The Intelligent Investor". This is a very good introduction to investment, but it's also quite a long read.
    - rdl 15y ago
      Often it means the assets are mispriced (banking stocks....)
- njharman 15y ago
  So? To "make company private" you have to buy the outstanding shares. 550B+
  - stevewilhelm 15y ago
    Yes, at a premium. For example Alibaba announced last month it would buy back its shares at a 46% premium.
latch 15y ago
Not to mention the inherit problem of trying to corner a market. It would be hard to buy the shares back without prices being driven up....https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday
padobson 15y ago
I just want to point out that the amount of cash it takes to take a public company private is not equal to Shares * Market Price. It's actually Float Shares * Market Price. This doesn't make much of a difference in Apple's case, because most of their market share is floating on the public market. Quick calculations: 932.37M Shares Outstanding x ~$600/share = $559.4B Mkt Cap 931.79M Float Shares x ~$600/share = $559.0B Price to go Private $400mm, in this case, doesn't make much of a difference, but if you talk about this for other companies in the future, keep it in mind. Source: http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics
- ChuckMcM 15y ago
  But you only have to have 50.1% of the shares to force the other 49.9% to let you go private :-)
  - SoftwareMaven 15y ago
    Serious question: wouldn't the SEC say "no way" if that 49.9% constituted more than 500 (at least, I believe that's the number) people?
    - msellout 15y ago
      Yes. if (NumOwners >= 500) public = true;
      - grinich 15y ago
        Actually, I think the rule is >500 investors, you have to publicly disclose financials a la Sarbanes–Oxley Act. Different than being a publicly traded company.
    - raldi 15y ago
      No, they'd just require the private company to disclose the same sort of quarterly information that a public company does. You're clearly alluding to Facebook being "forced" to go public, but they too could remain private with 501 investors. But once they're revealing their numbers, they figured they might as well jump in with both feet and do the IPO.
beatle 15y ago
Even with the dividend and share buyback plan, Apple is expected to continue to add significant amounts of money to its cash balance, which stood at $97.6 billion at the end of 2011. If Apple consumes about $15 billion a year in cash for its stock buybacks and dividends, it is generating so much new cash from its business that its total cash balance at the end of fiscal 2013 could be around $180 billion, estimated Gene Munster, an analyst at Piper Jaffray. http://www.nytimes.com/2012/03/20/technology/apple-to-use-cash-for-stock-dividend-and-buyback.html?_r=1&hp http://www.nytimes.com/2012/03/20/technology/apple-to-use-ca...

by andylei 15y ago

eugenegamma 15y ago

You're off by a factor of 10 there but the claim is still true.

namsral 15y ago

> the market cap on that company would be > $X. Market cap != Value assets The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.

andylei 15y ago
if the market cap of the company fell below the cash (net of debt obligations) of that company, the investors could liquidate the company, take the cash, and make a profit. thus, it's pretty atypically for market cap to dip below asset value, and even more atypical for market cap to dip below cash holdings.
- namsral 15y ago
  Apple came pretty close in 1997 when they had $380 in cash and a market cap of 2.2B but their LT debt was growing fast. ~1B at the time. Source: http://www.businessweek.com/1997/34/roster34/aapl.htm http://www.businessweek.com/1997/34/roster34/aapl.htm
- karamazov 15y ago
  Actually, finding companies whose market cap is less than asset value is a great way of insuring you're buying shares at a discount. This is pretty rare in technology companies, which are generally valued far above assets, but it's possible to find this sort of thing in more predictable sectors. For more information, you could look at Benjamin Graham's "The Intelligent Investor". This is a very good introduction to investment, but it's also quite a long read.
  - rdl 15y ago
    Often it means the assets are mispriced (banking stocks....)
njharman 15y ago
So? To "make company private" you have to buy the outstanding shares. 550B+
- stevewilhelm 15y ago
  Yes, at a premium. For example Alibaba announced last month it would buy back its shares at a 46% premium.

latch 15y ago

Not to mention the inherit problem of trying to corner a market. It would be hard to buy the shares back without prices being driven up....https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday

padobson 15y ago

I just want to point out that the amount of cash it takes to take a public company private is not equal to Shares * Market Price. It's actually Float Shares * Market Price. This doesn't make much of a difference in Apple's case, because most of their market share is floating on the public market. Quick calculations: 932.37M Shares Outstanding x ~$600/share = $559.4B Mkt Cap 931.79M Float Shares x ~$600/share = $559.0B Price to go Private $400mm, in this case, doesn't make much of a difference, but if you talk about this for other companies in the future, keep it in mind. Source: http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics

ChuckMcM 15y ago
But you only have to have 50.1% of the shares to force the other 49.9% to let you go private :-)
- SoftwareMaven 15y ago
  Serious question: wouldn't the SEC say "no way" if that 49.9% constituted more than 500 (at least, I believe that's the number) people?
  - msellout 15y ago
    Yes. if (NumOwners >= 500) public = true;
    - grinich 15y ago
      Actually, I think the rule is >500 investors, you have to publicly disclose financials a la Sarbanes–Oxley Act. Different than being a publicly traded company.
  - raldi 15y ago
    No, they'd just require the private company to disclose the same sort of quarterly information that a public company does. You're clearly alluding to Facebook being "forced" to go public, but they too could remain private with 501 investors. But once they're revealing their numbers, they figured they might as well jump in with both feet and do the IPO.

beatle 15y ago

Even with the dividend and share buyback plan, Apple is expected to continue to add significant amounts of money to its cash balance, which stood at $97.6 billion at the end of 2011. If Apple consumes about $15 billion a year in cash for its stock buybacks and dividends, it is generating so much new cash from its business that its total cash balance at the end of fiscal 2013 could be around $180 billion, estimated Gene Munster, an analyst at Piper Jaffray. http://www.nytimes.com/2012/03/20/technology/apple-to-use-cash-for-stock-dividend-and-buyback.html?_r=1&hp http://www.nytimes.com/2012/03/20/technology/apple-to-use-ca...