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Apple has more cash on hand than nearly every private sector entity on Earth. They could build a fab with zero investment or credit activity.

verdverm 2y ago
Yet they are choosing to do a $110B stock buyback, which apparently exceeds their cash on hand in the books > Since Apple’s $110 billion stock buyback exceeds its balance sheet cash, how will the iPhone maker pay for the share buyback? https://www.forbes.com/sites/petercohan/2024/05/05/warren-buffett-dumps-13-of-apple-stake-before-110-billion-buyback/?sh=c68fd0e3c509#:~:text=Since%20Apple%E2%80%99s%20%24110%20billion%20stock%20buyback%20exceeds%20its%20balance%20sheet%20cash%2C%20how%20will%20the%20iPhone%20maker%20pay%20for%20the%20share%20buyback%3F https://www.forbes.com/sites/petercohan/2024/05/05/warren-bu...
- dagmx 2y ago
  Buybacks happen over a period. Cash on hand isn’t the only factor, cash flow in is a large one. Apple stated several years ago that they’re aiming to be cash neutral https://www.fool.com/investing/2018/02/02/understanding-apples-new-net-cash-neutral-goal.aspx https://www.fool.com/investing/2018/02/02/understanding-appl... In the earnings call last week they stated they’re still a while away from that goal. These buybacks are part of the net cash neutral strategy. Other forms they could take are upping R&D (but they already seem to be pretty high), or increasing employee wages (that would be much appreciated I’m sure) or reducing product margins (also probably appreciated by a different group). Though the latter two are harder to back out of if things ever go south.
  - nxobject 2y ago
    Can you ELI5 for someone who doesn't know corporate finance why constant cash surpluses would be unfavorable for them?
    - dagmx 2y ago
      Honestly, I do not understand it myself either. I just understand the mechanisms behind it but I do not understand why one would logically want less money.
      - positr0n 2y ago
        If you owned a business that had a bunch of cash sitting around with no useful growth opportunities to invest it in you wouldn't keep it in your business's bank account, you'd pay yourself and spend the money on a vacation or invest it elsewhere. Same with a giant corporation. Its shareholders want to be invested in a business. Owning part of a business that is 10% just a giant cash pile isn't necessarily appealing. The corporation should return the cash to its investors so they can decide what they want to do with it.
        dagmx 2y ago
        That’s fair. I’d probably invest it in my employees though personally rather than return to investors, but I follow.
    - verdverm 2y ago
      Sitting on cash means you aren't putting it to use. 1. invest in the business to increase long-term profits 2. give out dividends to investors 3. buy back stocks so future dividends are more valuable Cash flow (from revenues) is relatively predictable, so you can count on more coming in to cover future expenses. Business can also issue bonds (loans) should cash be in shortfall or they want to invest in a factory or similar.
runjake 2y ago
Even if they could, they haven’t. And if they did, it would take months/years and we would hear about it.
oldpersonintx 2y ago
[dead]
nxobject 2y ago
Right after buying Disney, too.
- HeatrayEnjoyer 2y ago
  Buying Disney?

verdverm 2y ago

Yet they are choosing to do a $110B stock buyback, which apparently exceeds their cash on hand in the books > Since Apple’s $110 billion stock buyback exceeds its balance sheet cash, how will the iPhone maker pay for the share buyback? https://www.forbes.com/sites/petercohan/2024/05/05/warren-buffett-dumps-13-of-apple-stake-before-110-billion-buyback/?sh=c68fd0e3c509#:~:text=Since%20Apple%E2%80%99s%20%24110%20billion%20stock%20buyback%20exceeds%20its%20balance%20sheet%20cash%2C%20how%20will%20the%20iPhone%20maker%20pay%20for%20the%20share%20buyback%3F https://www.forbes.com/sites/petercohan/2024/05/05/warren-bu...

dagmx 2y ago
Buybacks happen over a period. Cash on hand isn’t the only factor, cash flow in is a large one. Apple stated several years ago that they’re aiming to be cash neutral https://www.fool.com/investing/2018/02/02/understanding-apples-new-net-cash-neutral-goal.aspx https://www.fool.com/investing/2018/02/02/understanding-appl... In the earnings call last week they stated they’re still a while away from that goal. These buybacks are part of the net cash neutral strategy. Other forms they could take are upping R&D (but they already seem to be pretty high), or increasing employee wages (that would be much appreciated I’m sure) or reducing product margins (also probably appreciated by a different group). Though the latter two are harder to back out of if things ever go south.
- nxobject 2y ago
  Can you ELI5 for someone who doesn't know corporate finance why constant cash surpluses would be unfavorable for them?
  - dagmx 2y ago
    Honestly, I do not understand it myself either. I just understand the mechanisms behind it but I do not understand why one would logically want less money.
    - positr0n 2y ago
      If you owned a business that had a bunch of cash sitting around with no useful growth opportunities to invest it in you wouldn't keep it in your business's bank account, you'd pay yourself and spend the money on a vacation or invest it elsewhere. Same with a giant corporation. Its shareholders want to be invested in a business. Owning part of a business that is 10% just a giant cash pile isn't necessarily appealing. The corporation should return the cash to its investors so they can decide what they want to do with it.
      - dagmx 2y ago
        That’s fair. I’d probably invest it in my employees though personally rather than return to investors, but I follow.
  - verdverm 2y ago
    Sitting on cash means you aren't putting it to use. 1. invest in the business to increase long-term profits 2. give out dividends to investors 3. buy back stocks so future dividends are more valuable Cash flow (from revenues) is relatively predictable, so you can count on more coming in to cover future expenses. Business can also issue bonds (loans) should cash be in shortfall or they want to invest in a factory or similar.

runjake 2y ago

Even if they could, they haven’t. And if they did, it would take months/years and we would hear about it.

oldpersonintx 2y ago

[dead]

nxobject 2y ago

Right after buying Disney, too.

HeatrayEnjoyer 2y ago
Buying Disney?