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> is a 30% stock jump from becoming the first trillion-dollar company This is incorrect. The reason is share buybacks, which Apple has been aggressive with. Re

> is a 30% stock jump from becoming the first trillion-dollar company This is incorrect. The reason is share buybacks, which Apple has been aggressive with. Remember, when the price was $100 last (split adjusted), its market capitalization was $700 billion. Today, it's price is $130, but the market capitalization is not $900 billion, but only $765 billion. This is because the number of shares outstanding has gone down significantly. In this scenario, the price and market capitalization will not increase by the same percentage. In fact, it is possible for Apple to have a very good price return with no increase in market capitalization at all (consider it generates a lot of free cash flow to buy back stock).

pcurve 12y ago
you are technically correct... yes. Apple can also reverse-split tomorrow 10 to 1, and no impact market cap, and you'd also be technically correct.
- tinkerrr 12y ago
  Prices are always split adjusted, so that is meaningless. My point is, price and market cap are not related that way.
coralreef 12y ago
Market cap is calculated by outstanding shares * share price. A company buying back its shares shouldn't affect the outstanding shares figure, because it already includes it. However now that there are less publicly available shares available on the market, the share price should go up, as long as there is demand. By how much, I don't know, perhaps it ends up making Apple more valuable.
- tinkerrr 12y ago
  When a company buys back shares, the number of outstanding shares decreases. That's the whole reason for buying back shares. See http://www.investopedia.com/articles/investing/112013/impact-share-repurchases.asp http://www.investopedia.com/articles/investing/112013/impact... for a basic introduction to share buybacks.
  - coralreef 12y ago
    I see, so even if outstanding shares is reduced, each share becomes "more valuable" as EPS will improve. So perhaps the market cap will end up balancing itself out?

pcurve 12y ago

you are technically correct... yes. Apple can also reverse-split tomorrow 10 to 1, and no impact market cap, and you'd also be technically correct.

tinkerrr 12y ago
Prices are always split adjusted, so that is meaningless. My point is, price and market cap are not related that way.

coralreef 12y ago

Market cap is calculated by outstanding shares * share price. A company buying back its shares shouldn't affect the outstanding shares figure, because it already includes it. However now that there are less publicly available shares available on the market, the share price should go up, as long as there is demand. By how much, I don't know, perhaps it ends up making Apple more valuable.

tinkerrr 12y ago
When a company buys back shares, the number of outstanding shares decreases. That's the whole reason for buying back shares. See http://www.investopedia.com/articles/investing/112013/impact-share-repurchases.asp http://www.investopedia.com/articles/investing/112013/impact... for a basic introduction to share buybacks.
- coralreef 12y ago
  I see, so even if outstanding shares is reduced, each share becomes "more valuable" as EPS will improve. So perhaps the market cap will end up balancing itself out?