Apple Options Rumors: Getting to the Core

Today we are either being handed a huge gift by Apple Computer Inc. (AAPL), or we are on the road to doom.

I know I'm a radical but, rather than listen to a bunch of half-assed analysts on CNBC ("Can Not Be Checking") and 4th party accounts from pretty much every other news source, I took the 45 seconds it takes to actually track down the actual Financial Times article all this new nonsense is based on.

It turns out this story originated from San Francisco, the same city as yesterday's PR attack on Apple began. It also turns out that, like yesterday's attack -- there is no new information here, just a repackaging of the original story and facts.

"According to an Apple filing in 2002, the options under review were handed to Mr Jobs in October 2001, at an exercise price of $18.30 a share. However, the purported board authorization was dated near the end of the year, suggesting that the benefits were both not properly authorized and were backdated. Mr Jobs later surrendered his options before they were exercised, implying that he did not gain any direct benefit from them. He was later given a grant of restricted stock by the company instead.

Under Apple's rules, the chief executive's remuneration must be set by a compensation committee of independent directors and later authorized by the full board."

I know -- that's it! The top business news story of the past 24 hours, all the non-stop pontificating by every analyst with a pulse since this story broke last night, and that is all there is.

We made a lot of money on this nonsense yesterday, and we will exercise caution, but let's be on the lookout for another great opportunity today as all this negative Apple news seems very oddly timed ahead of MacWorld: the Friday filing of the actual SEC statement, the fact that PC magazine wrote a glowing article re. the 30% increase in Mac sales (thanks Kustomz), the fact that iTunes traffic increased 400% over last year's holidays...

With plenty of positive Apple news to report on, I find it very interesting that the Financial Times' other Apple headline yesterday was "Apple remains unfazed by march of Microsoft's Zune." March of Zune? I don't even think Microsoft's own PR division would have the nerve to call a 1.9% market share a "march."

Unfortunately, in today's media saturated world, it is not enough to just check our sources -- we also need to check the agenda of our sources!

Related: Apple Stock See-Saws On Reports Of Faked Options Docs

Comments

[Stockerblog:]

Great article. I totally agree with your opinions on this, especially on the unusual timing of this news prior to MacWorld. I discussed the MacWorld and Apple stock price 'Correlation' a couple weeks ago in my article hardware.seekingalpha....

2006 Dec 28 11:49 AM

[DavidK:]

Funny or just downright "shaking the money tree"! I'm amazed at some of the,shall we call respectable, institutions are doing to rattle the little investor. Thanks for your honest report.

2006 Dec 28 09:06 PM

[David Harper:]

But the new story, yes at the core, is beyond mere backdating and goes to whether documents were altered with senior executive consent, possibly Jobs, to fabricate a Board meeting. I have no clue about the outcome or veracity, but if it's true it poses a serious legal issue. See Tiernan Ray @ Barron's latest, Enderle is absolutely right.

2006 Dec 28 10:27 PM

[Christopher...:]

David: Agree on your article, but be fair to this analyst who said on CNBC this morning that the AAPL folks have managed to spin bad news as good. I think that CEO Steve Jobs will be forced to step down. As the SEC disclosure stated: "Although the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications." Sounds to me like a deliberate violation of law and regulation.

2006 Dec 29 01:02 PM

[David Harper:]

Hi Chris, we met at XBRL-US when you chaired the analyst Panel. I hope you are doing well!

Appreciate your comment because I don't think investors take this seriously enough, governance is a sort of public externality. We all benefit from better governance practices; investors should insist that the Board do it's job, on small and large matters. It's not enough to be satisfied that the stock won't be hurt. Yes, there is more to investor life than making money on a single trade. We are all better off when the SEC hold management's feet to the fire.

2006 Dec 29 02:10 PM

[Martin Snider:]

Come on guys. The idea that Jobs would be anything other than fined or "given a stern talking too" is a disservice to individual investors. The SEC will be holding no one's "feet to the fire." Christopher Cox was the most vocal critic of increased oversight in the late-Nineties. And now he is the Chairman. All of these headlines will continue to make great buying opportunities.

2006 Dec 30 05:53 PM