10 ms·

DOJ compares AAPL share buybacks with R&D as 'evidence' of lack of competition

33 points by ksec 3y ago

deleted 3y ago
[deleted]
LibrePenguin 3y ago
[dead]
Bostonian 3y ago
"A new report highlights what probably amounts the most most absurd stretch in the DOJ’s antitrust lawsuit." Suppose Apple spent more on R&D, made the iPhone even better, and thus increased its market share. The DOJ would probably cite that market share as evidence of a monopoly too.
- fuzzylightbulb 3y ago
  Apple isnt being sued because they make nice hardware that people like to buy. They're being sued because they use their position in the marketplace to stifle competition, restrict developer choices, and lock customers into their ecosystem. The DOJ wrote up their exact rationale for the suit, so it would be nice if people would take the time to understand the actual situation instead of arguing against their prefered strawman. I will never understand why people are out there falling over each other to be the white knight for a company with a 2.6 trillion dollar market cap.
  - ralfd 3y ago
    Because this is the government (or bureaucrats on a power trip) picking winners/losers? Law Prof from Madrid: https://twitter.com/laz_radic/status/1771152693291057439 https://twitter.com/laz_radic/status/1771152693291057439 > The DOJ complaint against Apple filed yesterday has led me to think, once again, about the increasing chasm that exists between antitrust theory and basic common sense & logic. I think this dissonance is getting worse and worse, to the point of mutual exclusion. > Here's where I'm coming from: what I have always viewed as a modest tool for correcting blatant anticompetitive conduct is increasingly being wielded as a weapon to redraw minute product design choices, redesign markets, and pistol whip companies for political gain. > What worries me aren't a couple of contrived cases brought by unhinged regulators at either side of the Atlantic, but that this marks a much broader move towards a centrally-administered economy where choices are made by anointed regulators, rather than by consumers. > And, to be clear, I am aware that the DOJ is saying that Apple is maintaining its iPhone market position thanks to anticompetitive practices but, quite frankly, discounting the possibility that users simply PREFER the iPhone in this day & age is ludicrous to me. > But in the real world, there exists no legal obligation to be productive or to use one's resources efficiently. People aren't punished for being idle. Yet a private company harms us when it doesn't design its products the way public authorities thinks is BEST? > Would X be better if the length of all tweets was uncapped? Would McDonald's be better if it also sold BK's most popular products - like the Whopper? Would the Playstation be better if it also had XboX, Nintendo and PC games? I don't know, maybe. Does it matter? > The magic of antitrust, of course, is that if one can somehow connect these theoretical shortcomings to market power — no matter how tenuously — all of a sudden, one has a blockbuster case against an evil monopolist & is on the right side of history. > But this puts the cart before the horse. Competition authorities need to stop pinning contrived market failures on companies they dislike, and go back to pinning companies on market failures. Ultimately, we're fighting the latter, not the former.
  - nickpp 3y ago
    > I will never understand why people are out there falling over each other to be the white knight for a company Because a company is giving us awesome products and services which we willingly spend our hard-earned money for. It's also creating (well paid) jobs which we can choose to take and platforms where other businesses thrive and build even more jobs. Finally, as investors, it's allowing us to participate in and benefit from its success. On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Finally, when a psychopathic leader inevitably takes over - they literally send us to die in their sick wars or attack others for their enrichment.
    - bungeonsBaggins 3y ago
      > On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Slow down there, John Galt. How is discouraging monopolistic practices going to line the pockets of these parasitic bureaucrats? If Apple has enough control of the marketplace that nobody can meaningfully compete with them, do you think that's better or worse for "us"?
      - nickpp 3y ago
        > How is discouraging monopolistic practices going to line the pockets Three easy ways come to mind: 1) Play the stock market using the insider info on decisions and regulations politicians know well in advance. 2) Regulations and laws once enacted have to be implemented. So many compliance chief or consultant positions suddenly opening up at multinational corporations. 3) Cheap populism moves work wonders on economically-ignorant voters. "I smacked Apple/Microsoft/Google" guarantees years of sucking from the public teat The bitter irony is that the only effective way to deal with monopolies is though free market competition. And regulation is the polar opposite of that: regulation discourages startups and favors the incumbents. So, yes, heavily regulated markets guarantee less competition which is worse for "us".
  - forgotmyinfo 3y ago
    It makes people uncomfortable to think that maybe massive, powerful companies do bad things, especially if they are either employed by one or hope to start one of their own. It's not fun being on the other side of the wealth divide in this country, and people will fight tooth and nail to prevent it from happening to themselves and their families. Unfortunately, the more precarious life gets, the harder people will fight. It's not looking good out there.
random_savv 3y ago
Peter Thiel must be smiling :)
ArtTimeInvestor 3y ago
It looks like Apple's lack of R&D could become a threat to their future. Many companies are able to build a phone these days. But not every company will be able to build a top-notch AI assistant. The race is on. Whoever will have the best AI will dictate everybody else the conditions for using it. If it turns out that only Google has the infrastructure to digest all the world's information in real-time and feed it into a top-notch LLM - that would be the biggest threat. Then maybe nobody can compete. Because nobody has built a search engine on par with Google yet. Which probably means that nobody else has figured out how to ingest data on the scale Google does.
- trollied 3y ago
  Lack of R&D? >In fiscal 2023, which ended September 30, the company spend $29.9 billion on research and development
  - aeyes 3y ago
    R&D in accounting is very broad, even people who maintain existing systems can be expensed as R&D
  - ArtTimeInvestor 3y ago
    That is less than Google. And Apple seems to have spent theirs on the wrong projects. A car which they binned and a headset which seems to not be what people are looking for. What people are looking for is software which does their work for them. The two big assets Apple has at the moment are the trust of their users and good chip production capabilites. We'll see where that leads to. My feeling is that software is more valuable than brand and hardware. So I have the feeling that Google and Microsoft currently have a better starting position into the advent of AI than Apple.
    - kec 3y ago
      The largest chunk of R&D spending is going to be employee comp, that differential is almost certainly due to google hiring like mad during the pandemic versus Apple famously running very lean.
convery 3y ago
While not 'evidence' per se, it's a common trend with monopolies (e.g. Xerox back in the day) to shift engineering/R&D budgets to marketing for a better ROI.
mjburgess 3y ago
It seems it'd be a net benefit to make most share buyback programmes illegal; or increase the taxes on them dramatically. If frequent and at scale, they just seem to be prima fasce evidence of a market failure.
- toomuchtodo 3y ago
  Stock buybacks used to be illegal. > “Prior to 1982, stock buybacks were considered illegal stock manipulation, but President Reagan's Securities and Exchange Commission implemented a rule to exempt them. http://chuygarcia.house.gov/media/press-releases/representatives-garcia-hoyle-and-khanna-reintroduce-legislation-to-ban-stock-buybacks http://chuygarcia.house.gov/media/press-releases/representat...
  - awithrow 3y ago
    Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"?
    - rimunroe 3y ago
      > Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"? I didn't take that as toomuchtodo trying to make an argument personally. toomuchtodo pointed out that they were illegal in the past, and shared a statement from a politician who wants to outlaw them again. Both of these are direct responses to mjburgess. That stock buybacks were illegal in the past is a relevant factual statement, as is a politician having a platform (seemingly) aligned with the wishes of mjburgess.
      - toomuchtodo 3y ago
        This. First google result for “illegal stock buybacks.” Can’t wait for GPTs to replace this need (citation for assertion), as first page Google results aren’t great (insert elaine benice i hate it meme here).
foobarbazboff 3y ago
Apple should not be saving money, they should be spending it no matter what, even on things that don't matter. If they need money for something they should just borrow. This is how it's done in the government and it always seems to work out pretty well. — the DOJ probably
- deleted 3y ago
  [deleted]
dpflan 3y ago
Is this really an "absurd" take? How else do you increase stock price so easily and manipulate key metrics for investing (EPS)? Is the point of AAPL at this point to make computers or increase share holder value? Is a stock buyback truly a sign of confidence in the company?
- mypastself 3y ago
  If the company (and the industry) is maturing, then buybacks and dividends are indeed a sign of confidence.
  - diggan 3y ago
    Confidence and maturation, or stagnation? I can see good arguments being made for both directions.
  - ozborn 3y ago
    Dividends are taxed directly and generally aren't tied to CEO compensation, unlike buybacks. Buybacks are more a sign of management incentive structure.
    - mypastself 3y ago
      The filing references dividends in addition to buybacks, stating that their ratio to R&D indicates anti-competitive behavior.
  - phil21 3y ago
    Buybacks are a tax dodge. Nothing else. Dividends are the proper way to pay out excess cash the enterprise generates. Society decided how much to tax such distributions, and a certain class of people didn't like paying even that laughably small share. Buybacks were justified by a whole lot of things that simply are outright lies. Take away the tax benefit and you'd see them go away overnight.
    - mypastself 3y ago
throwaway4good 3y ago
Mobile phones are locked in the Apple Google duopoly for the foreseeable future. Apple the only one being able to make money while Google based manufacturers are competing for scraps. Google’s indirect monetization of Android makes it impossible for competitors to emerge. DOJ is shooting at the wrong guy if what they want is more competition.
- yxhuvud 3y ago
  > while Google based manufacturers are competing Yes, this is exactly what the DOJ likes in that part of the situation. Companies that compete.
  - throwaway4good 3y ago
    None of these companies make enough money to compete with Apple. That is why there is a lack of innovation and why a true third-party competitor cannot emerge. Google makes plenty of money indirectly by their ad-profiling business spending some of it sponsoring Android and some of it paying off Apple.
jeffreportmill1 3y ago
Stock buybacks are a great way for executives to further line their pockets inconspicuously and to allow shareholders to dodge corporate and dividend taxes. It does nothing for the health of the company. There should be a cap on executive compensation - say 100 times the average employee salary. Barring that, there should be a millionaires and/or wealth tax, so that they at least pay the same tax rate as their secretary.
- adabyron 3y ago
  The "Wealth Tax" proposed currently by Sen Warren & a few others seems more like attention grabbing than a serious plan. They've been tried in other countries & failed miserably. They're hard to manage & imo seem like a poor choice. If you want to increase taxes on the wealthy I would go after loopholes instead, which Sen Warren & others are also trying to do to be fair. You could also look closer at trying to slightly increase tax on sales transactions or taking loans against your equity. It would need to be a small enough amount that makes a difference to tax income but not enough that people try hard to avoid it.
- forgotmyinfo 3y ago
  [flagged]
- Ekaros 3y ago
  Stock buybacks look extra suspicious when majority of compensation for executives is based on stock value... So they can both manipulate the price of stock and also reap benefits from that manipulation. With dividends they have to actually hold the stock to benefit from them.
ZeroCool2u 3y ago
Personally, I've never really been comfortable with the concept of stock buy backs. We already have dividends and obviously the redirection to R&D for increasing shareholder value. It doesn't seem like something that's healthy for the market as it's as close as you can get to legal price manipulation and obfuscates the "true" price. Does anyone have a market theory justification that makes them comfortable with the idea?
- idontknowtech 3y ago
  The argument is that a company like Apple, instead of investing its cash pile itself, should return that money to its shareholders who will, collectively, better allocate their capital than Apple will. This is almost certainly true. The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better. I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.
  - tzs 3y ago
    There was a company a long time ago that had a clever idea. Instead of doing a dividend they would do a stock split followed by a stock buyback. For example a 1.03 to 1 stock split followed by a buyback of 3/103 of the stock. So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company. The idea was that this would be capital gains income to the shareholders rather than ordinary income. The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.
  - woopsn 3y ago
    Apple is unconcerned with the efficient allocation of capital. Hence their shell companies in Ireland. Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.
Delumine 3y ago
Stock buybacks should be outlawed. They're really a waste for the economy; cash is being used up to buy up imaginary assets to make your previously-owned imaginary assets more valuable. Why not use that money on more impactful things? Like higher salaries, social programs, or just R&D in general.
- onlyrealcuzzo 3y ago
  > Like higher salaries, social programs, or just R&D in general. Because that could be a waste as well. Stock buybacks are just a tax-advantaged form of dividends (and shouldn't be legal for those reasons). Just do dividends.
  - gimmeThaBeet 3y ago
    I would argue in a global sense its more tax-efficient that tax-advantaged (which is admittedly pedantic). The main idea people need to remember is that if a company buys back its stock, someone else is selling it. For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates). For an X amount of dollars, dividends and buybacks are going to generate the roughly a similar kind of 'tax footprint' for lack of a better term. The potential taxable events are just filtered to 'the entities that wanted to sell their shares' vs 'every equity holder'.
    - onlyrealcuzzo 3y ago
      > For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates). A dividend is always taxed as income. If you inflate the price of the stock to pay the dividend (stock buyback), it's taxed as capital gains.
      - gimmeThaBeet 3y ago
        In the average case it's a fair assumption the dividend is going to be qualified, and the owner is going to meet the 60/120 holding period, which effective means it will be taxed at cap gains rates. If not that's kinda their own deal. I think people fixate too much on pricing dynamics. Kind of at a Gaussian surface level, the simple way to explain a price is eps * earnings multiple, where your inflated demand dynamics get lumped in with the multiple. The issue is an earnings multiple encompasses so much information as to be of little use, it's not trivial to quantify anything from it. Let me be clear, buybacks can be a bad use of capital. The stock can go down to any number of factors, general market downturn etc. A buyback is an investment of the company in itself, and investments can be bad. But if you have a number of earnings and a number of shares, if you reduce the number of shares, you have more earnings per share. At a constant multiple, an increase in eps should dictate an increase in price. That's as real as you and me.
pliny_the_fella 3y ago
In the article they say, Apple spent $33B on R&D and $77B on stock buybacks. The fact that they leverage their all encompassing 30% App Store fee, a tax on actual PRODUCTIVE smaller businesses, and then funnel that back directly to their investors for capital gains is a cause for concern.
- ralfd 3y ago
  You would be surprised what the margin is in retail.
  - TheCoelacanth 3y ago
    Gross margin is often that high or higher, but net margin is often single digits. That's in contrast to Apple with has essentially zero costs on the things sold in their store and has a sky-high net margin.
  - asadotzler 3y ago
    this is wrong. look up both gross and net margins for top retailers (say Kroger and Walmart) and learn a thing or two before making such clearly wrong claims.
SkyBelow 3y ago
Isn't a stock buy back equivalent to a reverse stock split with the gains being split between those who want to sell their stock getting immediate money while those who don't get higher value stocks? I've seen a lot of negativity about the process, but I don't see how it is any worse than anything else involving moving stocks. Take a company with X non-liquid value and Y liquid value. They want to spent some part of Y, let's call it Z, doing a stock buy back. There are M stocks to start with, and after a buyback there will be N stocks. Default (do nothing): Original stock holders have M stocks worth (X + Y) total. Total value, X + Y. Pay dividends instead: Original stock holders have M stocks worth (X + Y - Z) total and Z dividends. Total value, X + Y. Do stock buyback: Original stock holders have N stocks worth (X + Y - Z) total and Z buyback payments. Total value, X + Y. The only difference between 1 and 2 vs 3 is how the value is split. In 1 each stock holder holds stock proportional to how many stocks they held at the start. In 2, each stock holder holds stocks and dividends proportional to how many stocks they held at the start. In 3, stock holders hold different allocations of stock and buy back money based on if they sold or not, but with the total value proportional to how many stocks they held at the start. What makes 3 so much worse than 1 or 2?

33 points by ksec 3y ago

deleted 3y ago

[deleted]

LibrePenguin 3y ago

[dead]

Bostonian 3y ago

"A new report highlights what probably amounts the most most absurd stretch in the DOJ’s antitrust lawsuit." Suppose Apple spent more on R&D, made the iPhone even better, and thus increased its market share. The DOJ would probably cite that market share as evidence of a monopoly too.

fuzzylightbulb 3y ago
Apple isnt being sued because they make nice hardware that people like to buy. They're being sued because they use their position in the marketplace to stifle competition, restrict developer choices, and lock customers into their ecosystem. The DOJ wrote up their exact rationale for the suit, so it would be nice if people would take the time to understand the actual situation instead of arguing against their prefered strawman. I will never understand why people are out there falling over each other to be the white knight for a company with a 2.6 trillion dollar market cap.
- ralfd 3y ago
  Because this is the government (or bureaucrats on a power trip) picking winners/losers? Law Prof from Madrid: https://twitter.com/laz_radic/status/1771152693291057439 https://twitter.com/laz_radic/status/1771152693291057439 > The DOJ complaint against Apple filed yesterday has led me to think, once again, about the increasing chasm that exists between antitrust theory and basic common sense & logic. I think this dissonance is getting worse and worse, to the point of mutual exclusion. > Here's where I'm coming from: what I have always viewed as a modest tool for correcting blatant anticompetitive conduct is increasingly being wielded as a weapon to redraw minute product design choices, redesign markets, and pistol whip companies for political gain. > What worries me aren't a couple of contrived cases brought by unhinged regulators at either side of the Atlantic, but that this marks a much broader move towards a centrally-administered economy where choices are made by anointed regulators, rather than by consumers. > And, to be clear, I am aware that the DOJ is saying that Apple is maintaining its iPhone market position thanks to anticompetitive practices but, quite frankly, discounting the possibility that users simply PREFER the iPhone in this day & age is ludicrous to me. > But in the real world, there exists no legal obligation to be productive or to use one's resources efficiently. People aren't punished for being idle. Yet a private company harms us when it doesn't design its products the way public authorities thinks is BEST? > Would X be better if the length of all tweets was uncapped? Would McDonald's be better if it also sold BK's most popular products - like the Whopper? Would the Playstation be better if it also had XboX, Nintendo and PC games? I don't know, maybe. Does it matter? > The magic of antitrust, of course, is that if one can somehow connect these theoretical shortcomings to market power — no matter how tenuously — all of a sudden, one has a blockbuster case against an evil monopolist & is on the right side of history. > But this puts the cart before the horse. Competition authorities need to stop pinning contrived market failures on companies they dislike, and go back to pinning companies on market failures. Ultimately, we're fighting the latter, not the former.
- nickpp 3y ago
  > I will never understand why people are out there falling over each other to be the white knight for a company Because a company is giving us awesome products and services which we willingly spend our hard-earned money for. It's also creating (well paid) jobs which we can choose to take and platforms where other businesses thrive and build even more jobs. Finally, as investors, it's allowing us to participate in and benefit from its success. On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Finally, when a psychopathic leader inevitably takes over - they literally send us to die in their sick wars or attack others for their enrichment.
  - bungeonsBaggins 3y ago
    > On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Slow down there, John Galt. How is discouraging monopolistic practices going to line the pockets of these parasitic bureaucrats? If Apple has enough control of the marketplace that nobody can meaningfully compete with them, do you think that's better or worse for "us"?
    - nickpp 3y ago
      > How is discouraging monopolistic practices going to line the pockets Three easy ways come to mind: 1) Play the stock market using the insider info on decisions and regulations politicians know well in advance. 2) Regulations and laws once enacted have to be implemented. So many compliance chief or consultant positions suddenly opening up at multinational corporations. 3) Cheap populism moves work wonders on economically-ignorant voters. "I smacked Apple/Microsoft/Google" guarantees years of sucking from the public teat The bitter irony is that the only effective way to deal with monopolies is though free market competition. And regulation is the polar opposite of that: regulation discourages startups and favors the incumbents. So, yes, heavily regulated markets guarantee less competition which is worse for "us".
- forgotmyinfo 3y ago
  It makes people uncomfortable to think that maybe massive, powerful companies do bad things, especially if they are either employed by one or hope to start one of their own. It's not fun being on the other side of the wealth divide in this country, and people will fight tooth and nail to prevent it from happening to themselves and their families. Unfortunately, the more precarious life gets, the harder people will fight. It's not looking good out there.

random_savv 3y ago

Peter Thiel must be smiling :)

ArtTimeInvestor 3y ago

It looks like Apple's lack of R&D could become a threat to their future. Many companies are able to build a phone these days. But not every company will be able to build a top-notch AI assistant. The race is on. Whoever will have the best AI will dictate everybody else the conditions for using it. If it turns out that only Google has the infrastructure to digest all the world's information in real-time and feed it into a top-notch LLM - that would be the biggest threat. Then maybe nobody can compete. Because nobody has built a search engine on par with Google yet. Which probably means that nobody else has figured out how to ingest data on the scale Google does.

trollied 3y ago
Lack of R&D? >In fiscal 2023, which ended September 30, the company spend $29.9 billion on research and development
- aeyes 3y ago
  R&D in accounting is very broad, even people who maintain existing systems can be expensed as R&D
- ArtTimeInvestor 3y ago
  That is less than Google. And Apple seems to have spent theirs on the wrong projects. A car which they binned and a headset which seems to not be what people are looking for. What people are looking for is software which does their work for them. The two big assets Apple has at the moment are the trust of their users and good chip production capabilites. We'll see where that leads to. My feeling is that software is more valuable than brand and hardware. So I have the feeling that Google and Microsoft currently have a better starting position into the advent of AI than Apple.
  - kec 3y ago
    The largest chunk of R&D spending is going to be employee comp, that differential is almost certainly due to google hiring like mad during the pandemic versus Apple famously running very lean.

convery 3y ago

While not 'evidence' per se, it's a common trend with monopolies (e.g. Xerox back in the day) to shift engineering/R&D budgets to marketing for a better ROI.

mjburgess 3y ago

It seems it'd be a net benefit to make most share buyback programmes illegal; or increase the taxes on them dramatically. If frequent and at scale, they just seem to be prima fasce evidence of a market failure.

toomuchtodo 3y ago
Stock buybacks used to be illegal. > “Prior to 1982, stock buybacks were considered illegal stock manipulation, but President Reagan's Securities and Exchange Commission implemented a rule to exempt them. http://chuygarcia.house.gov/media/press-releases/representatives-garcia-hoyle-and-khanna-reintroduce-legislation-to-ban-stock-buybacks http://chuygarcia.house.gov/media/press-releases/representat...
- awithrow 3y ago
  Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"?
  - rimunroe 3y ago
    > Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"? I didn't take that as toomuchtodo trying to make an argument personally. toomuchtodo pointed out that they were illegal in the past, and shared a statement from a politician who wants to outlaw them again. Both of these are direct responses to mjburgess. That stock buybacks were illegal in the past is a relevant factual statement, as is a politician having a platform (seemingly) aligned with the wishes of mjburgess.
    - toomuchtodo 3y ago
      This. First google result for “illegal stock buybacks.” Can’t wait for GPTs to replace this need (citation for assertion), as first page Google results aren’t great (insert elaine benice i hate it meme here).

foobarbazboff 3y ago

Apple should not be saving money, they should be spending it no matter what, even on things that don't matter. If they need money for something they should just borrow. This is how it's done in the government and it always seems to work out pretty well. — the DOJ probably

deleted 3y ago
[deleted]

dpflan 3y ago

Is this really an "absurd" take? How else do you increase stock price so easily and manipulate key metrics for investing (EPS)? Is the point of AAPL at this point to make computers or increase share holder value? Is a stock buyback truly a sign of confidence in the company?

mypastself 3y ago
If the company (and the industry) is maturing, then buybacks and dividends are indeed a sign of confidence.
- diggan 3y ago
  Confidence and maturation, or stagnation? I can see good arguments being made for both directions.
- ozborn 3y ago
  Dividends are taxed directly and generally aren't tied to CEO compensation, unlike buybacks. Buybacks are more a sign of management incentive structure.
  - mypastself 3y ago
    The filing references dividends in addition to buybacks, stating that their ratio to R&D indicates anti-competitive behavior.
- phil21 3y ago
  Buybacks are a tax dodge. Nothing else. Dividends are the proper way to pay out excess cash the enterprise generates. Society decided how much to tax such distributions, and a certain class of people didn't like paying even that laughably small share. Buybacks were justified by a whole lot of things that simply are outright lies. Take away the tax benefit and you'd see them go away overnight.
  - mypastself 3y ago

throwaway4good 3y ago

Mobile phones are locked in the Apple Google duopoly for the foreseeable future. Apple the only one being able to make money while Google based manufacturers are competing for scraps. Google’s indirect monetization of Android makes it impossible for competitors to emerge. DOJ is shooting at the wrong guy if what they want is more competition.

yxhuvud 3y ago
> while Google based manufacturers are competing Yes, this is exactly what the DOJ likes in that part of the situation. Companies that compete.
- throwaway4good 3y ago
  None of these companies make enough money to compete with Apple. That is why there is a lack of innovation and why a true third-party competitor cannot emerge. Google makes plenty of money indirectly by their ad-profiling business spending some of it sponsoring Android and some of it paying off Apple.

jeffreportmill1 3y ago

Stock buybacks are a great way for executives to further line their pockets inconspicuously and to allow shareholders to dodge corporate and dividend taxes. It does nothing for the health of the company. There should be a cap on executive compensation - say 100 times the average employee salary. Barring that, there should be a millionaires and/or wealth tax, so that they at least pay the same tax rate as their secretary.

adabyron 3y ago
The "Wealth Tax" proposed currently by Sen Warren & a few others seems more like attention grabbing than a serious plan. They've been tried in other countries & failed miserably. They're hard to manage & imo seem like a poor choice. If you want to increase taxes on the wealthy I would go after loopholes instead, which Sen Warren & others are also trying to do to be fair. You could also look closer at trying to slightly increase tax on sales transactions or taking loans against your equity. It would need to be a small enough amount that makes a difference to tax income but not enough that people try hard to avoid it.
forgotmyinfo 3y ago
[flagged]
Ekaros 3y ago
Stock buybacks look extra suspicious when majority of compensation for executives is based on stock value... So they can both manipulate the price of stock and also reap benefits from that manipulation. With dividends they have to actually hold the stock to benefit from them.

ZeroCool2u 3y ago

Personally, I've never really been comfortable with the concept of stock buy backs. We already have dividends and obviously the redirection to R&D for increasing shareholder value. It doesn't seem like something that's healthy for the market as it's as close as you can get to legal price manipulation and obfuscates the "true" price. Does anyone have a market theory justification that makes them comfortable with the idea?

idontknowtech 3y ago
The argument is that a company like Apple, instead of investing its cash pile itself, should return that money to its shareholders who will, collectively, better allocate their capital than Apple will. This is almost certainly true. The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better. I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.
- tzs 3y ago
  There was a company a long time ago that had a clever idea. Instead of doing a dividend they would do a stock split followed by a stock buyback. For example a 1.03 to 1 stock split followed by a buyback of 3/103 of the stock. So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company. The idea was that this would be capital gains income to the shareholders rather than ordinary income. The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.
- woopsn 3y ago
  Apple is unconcerned with the efficient allocation of capital. Hence their shell companies in Ireland. Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.

Delumine 3y ago

Stock buybacks should be outlawed. They're really a waste for the economy; cash is being used up to buy up imaginary assets to make your previously-owned imaginary assets more valuable. Why not use that money on more impactful things? Like higher salaries, social programs, or just R&D in general.

onlyrealcuzzo 3y ago
> Like higher salaries, social programs, or just R&D in general. Because that could be a waste as well. Stock buybacks are just a tax-advantaged form of dividends (and shouldn't be legal for those reasons). Just do dividends.
- gimmeThaBeet 3y ago
  I would argue in a global sense its more tax-efficient that tax-advantaged (which is admittedly pedantic). The main idea people need to remember is that if a company buys back its stock, someone else is selling it. For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates). For an X amount of dollars, dividends and buybacks are going to generate the roughly a similar kind of 'tax footprint' for lack of a better term. The potential taxable events are just filtered to 'the entities that wanted to sell their shares' vs 'every equity holder'.
  - onlyrealcuzzo 3y ago
    > For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates). A dividend is always taxed as income. If you inflate the price of the stock to pay the dividend (stock buyback), it's taxed as capital gains.
    - gimmeThaBeet 3y ago
      In the average case it's a fair assumption the dividend is going to be qualified, and the owner is going to meet the 60/120 holding period, which effective means it will be taxed at cap gains rates. If not that's kinda their own deal. I think people fixate too much on pricing dynamics. Kind of at a Gaussian surface level, the simple way to explain a price is eps * earnings multiple, where your inflated demand dynamics get lumped in with the multiple. The issue is an earnings multiple encompasses so much information as to be of little use, it's not trivial to quantify anything from it. Let me be clear, buybacks can be a bad use of capital. The stock can go down to any number of factors, general market downturn etc. A buyback is an investment of the company in itself, and investments can be bad. But if you have a number of earnings and a number of shares, if you reduce the number of shares, you have more earnings per share. At a constant multiple, an increase in eps should dictate an increase in price. That's as real as you and me.

pliny_the_fella 3y ago

In the article they say, Apple spent $33B on R&D and $77B on stock buybacks. The fact that they leverage their all encompassing 30% App Store fee, a tax on actual PRODUCTIVE smaller businesses, and then funnel that back directly to their investors for capital gains is a cause for concern.

ralfd 3y ago
You would be surprised what the margin is in retail.
- TheCoelacanth 3y ago
  Gross margin is often that high or higher, but net margin is often single digits. That's in contrast to Apple with has essentially zero costs on the things sold in their store and has a sky-high net margin.
- asadotzler 3y ago
  this is wrong. look up both gross and net margins for top retailers (say Kroger and Walmart) and learn a thing or two before making such clearly wrong claims.

SkyBelow 3y ago

Isn't a stock buy back equivalent to a reverse stock split with the gains being split between those who want to sell their stock getting immediate money while those who don't get higher value stocks? I've seen a lot of negativity about the process, but I don't see how it is any worse than anything else involving moving stocks. Take a company with X non-liquid value and Y liquid value. They want to spent some part of Y, let's call it Z, doing a stock buy back. There are M stocks to start with, and after a buyback there will be N stocks. Default (do nothing): Original stock holders have M stocks worth (X + Y) total. Total value, X + Y. Pay dividends instead: Original stock holders have M stocks worth (X + Y - Z) total and Z dividends. Total value, X + Y. Do stock buyback: Original stock holders have N stocks worth (X + Y - Z) total and Z buyback payments. Total value, X + Y. The only difference between 1 and 2 vs 3 is how the value is split. In 1 each stock holder holds stock proportional to how many stocks they held at the start. In 2, each stock holder holds stocks and dividends proportional to how many stocks they held at the start. In 3, stock holders hold different allocations of stock and buy back money based on if they sold or not, but with the total value proportional to how many stocks they held at the start. What makes 3 so much worse than 1 or 2?