Icahn to make "precatory" proposal to call for Apple buyback vote


Carl Icahn on (where else?) Twitter: "Gave [Apple] notice we’ll be making a precatory proposal to call for vote to increase buyback program, although not at $150 billion level."

Icahn, never scared to self-promote, also says he'll be on the cover of the next issue of Time (out tomorrow), which will feature a piece on investor activism.

Apple (AAPL -0.5%) shares haven't moved much in response to Icahn's comments. Tim Cook has said Apple won't announce any changes to its capital allocation policy before early 2014. Icahn, meanwhile, has been pushing for a $150B expansion of Apple's buyback program, and has said he would "test the waters" regarding a proxy fight if the company ignored his calls.

From other sites
Comments (58)
  • Randal James
    , contributor
    Comments (4415) | Send Message
     
    precatory adj. referring to a wish or advisory suggestion which does not have the force of a demand or a request which under the law must be obeyed. Thus "precatory words" in a will or trust would express a "hope that my daughter will keep the house in the family," but do not absolutely prevent her from selling it.

     

    I would like him to take it to a vote - and lose.
    4 Dec 2013, 03:13 PM Reply Like
  • aardvark3
    , contributor
    Comments (665) | Send Message
     
    Icahn is like a bad odor that lingers.
    4 Dec 2013, 03:13 PM Reply Like
  • monkey see
    , contributor
    Comments (617) | Send Message
     
    It's always about what's good for Icahn not what's good for the company.Too much greed not so good.
    4 Dec 2013, 03:15 PM Reply Like
  • tuliptown
    , contributor
    Comments (1561) | Send Message
     
    If I become a billionaire, I would make all sort of precatory proposals. mostly to good looking single women, but I guess occasionally to good looking companies as well.

     

    why not?
    4 Dec 2013, 03:17 PM Reply Like
  • harrykutcher
    , contributor
    Comments (83) | Send Message
     
    ICAHN,i'm glad you think so much of your idea......now go sit down in the corner and take a timeout......let MR.COOK do what he does best,make apple shareholders happy....
    4 Dec 2013, 03:17 PM Reply Like
  • Warren Buffett007
    , contributor
    Comments (1041) | Send Message
     
    Icahn is very clever boy he bought very close to the $400 like APPLE,now he like to double it!.
    4 Dec 2013, 03:18 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (13369) | Send Message
     
    Yes but he'd like to double it and get out leaving a badly handicapped company to the remaining shareholders. I hope he sells at a loss and learns to give up attacking successful companies to loot their cash hoard.
    4 Dec 2013, 09:34 PM Reply Like
  • brea
    , contributor
    Comments (49) | Send Message
     
    these high techs selling bonds, then using proceeds for
    buybacks just seems soooo pathetically lame. yes, you expand
    multiples and minimally drive stock price up. but..........what
    does it actually "DO" for the company?
    it's an accntg gimmick that's seriously wearing thin.
    I.con has become an enormous BORE!!!!!!!
    after aapl will issue more shares driving price up w/
    "greater liquidity". c'mon.............. realllllllyyy?
    4 Dec 2013, 03:21 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    Companies are made up of employees, executives and their owners, the shareholders. Many employees and executives are shareholders too.

     

    Excessive amounts of excess capital on the books does nothing for the company, unless you are talking about stocks like Berkshire Hathaway that are great at asset allocation. Investors buy Berkshire shares because they want Warren Buffet to use Berkshire's cash to invest in companies. Apple is not a Berkshire.

     

    Rational investors do not invest in Apple to have Tim Cooke invest in other businesses. Rational investors invest in Apple in order to share in the profit made by selling consumer products. Apple has a lot more excess cash than it needs to operate as a going business, and produces much more cash each and every year. It's capital spending is at all time highs, and it still can't get rid of it's excess cash. Holding on to excessive amounts of "excess" cash is useless and does no one, not even "the company," any good. The question is not "why", but "why not" return excess capital to shareholders/owners?

     

    Finally, even if you want Tim Cooke to use Apple's excess capital to buy companies, one of the best value plays for the buck is Apple. Therefore, purchasing shares of Apple is one of the best investments he can make, unless of course you think Apple is a bad stock/company. If that is the case, "why are you on this board?"
    4 Dec 2013, 03:49 PM Reply Like
  • imvho
    , contributor
    Comments (405) | Send Message
     
    Is Apple's capital "excessive"? The answer to that question depends on information you don't have.

     

    Apple does not "invest in other businesses". Apple buys companies only rarely and then only to acquire patents or otherwise protected technology or capabilities that extend and enhance their own.

     

    Tim Cook has already engineered the largest buy-back in history, and has promised to look at the possibility of more buy-backs next year.

     

    I trust Apple to make the right decisions regarding capital and have no interest in "precatory" or predatory moves by outsiders.
    4 Dec 2013, 04:12 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    Buying shares in the low $400's would have been preferable to buying at around $600 next year.
    4 Dec 2013, 04:52 PM Reply Like
  • dgwine
    , contributor
    Comments (7) | Send Message
     
    Exactly. After all, if he buys (back) 10 million shares for the above purposes--and then it turns out he needs more cash in two or three years--then he can issue more shares. can he not????

     

    In the meantime, he's not earning 1% or less on all this cash. What are the profits that AAPL has made on the shares they bought back over the last six months--especially those at between $400 and $500. A lot more than 1% per annum.
    4 Dec 2013, 05:42 PM Reply Like
  • dollars48
    , contributor
    Comments (90) | Send Message
     
    My 300 shares would be voting not to do a buy back at this point. I think acquistions are the way to go right now. Maybe buy Tesla
    4 Dec 2013, 03:21 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    dollars48, I hope that was sarcasm.

     

    Yeah, that's what companies with too much capital usually do, pay dearly for underperforming assets. Excessive amounts of "excess" capital is dead weight. Not all excess capital is bad, just excessive amounts of it, like that held on the books of Apple. Some excess capital is great. Too much makes executives act too losely with their bounty. They tend to do stupid things and overpay for assets. The extra cash belongs to the owners. The company should find a way to return that capital to it's rightful owners.
    4 Dec 2013, 03:32 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (327) | Send Message
     
    the problem is that if they bring the cash back in to US, the gov. will rob 35% away from the cash. I think that's the reason we haven't gotten huge dividends or buybacks so far.
    4 Dec 2013, 04:17 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    udidgetanamenooneused. I completely agree with your sentiment. That is why it has not happened, yet. Carl's alternative is to borrow against that cash at extremely low interest rates in order to buy back the shares. The company avoids the 35% tax rate and takes advantage of current, low interest rates (that won't stay low forever). The cash is used as collateral to secure the loan. I like Humble Eagles response below where he states "That is why Carl is a billionaire." Yes, Apple can make great products for a profit AND be financially smart. It's not either - or. It can be both.
    4 Dec 2013, 04:40 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (327) | Send Message
     
    lol for the name part.

     

    I see your point. But if they use up all the $150billion in cash by using debt, they won't have any money left for R&D, acquisitions or any other purpose. They will have to rely to their cash flow (which is great) but they have no moat remaining at least in the short term . I can see your point. Maybe that might work after all.

     

    Why do you think AAPL is so reluctant to do what Icahn asks?
    4 Dec 2013, 07:24 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    I have no clue as to why Apple "appears" reluctant to do what Icahn asks. Maybe they don't want to be seen as bowing down to Icahn, or they may want to do something more on their own terms. They may have wanted to do somehing along those lines themselves and don't like him taking credit.

     

    Some commentators have even speculated that Apple could start using it's excess cash as a bank. They can loan customers the money to buy it's products, like the lending arms of the car companies. Not sure Apple would want the extra regulations, but it's an idea.

     

    I really haven't a clue why they don't want to do what Icahn asks, but I think the stock is undervalued and would be a good use of the extra cash. As long as they don't destroy the value of the company on something stupid, I would be okay with it. Maybe they will do some modified version of the share repurchase, maybe not.

     

    Apple's capital expenditures exploded recently leading up to the recent product launches and they still didn't make a dent in their excess cash, which will only grow on the sales of the new products. Apple has more than enough money to pay their expenses and buy back shares. That's just my 2 cents. That and $4.50 will get you a cup of coffee.
    4 Dec 2013, 08:28 PM Reply Like
  • 2puttwo
    , contributor
    Comments (655) | Send Message
     
    Wonder if he's, "Man of the Year." He would fit right in.
    4 Dec 2013, 03:24 PM Reply Like
  • monkey see
    , contributor
    Comments (617) | Send Message
     
    Instead of being on the cover of Time Icahn should be on the cover of Time Out.
    4 Dec 2013, 03:24 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (2750) | Send Message
     
    I'm with Carl! He is merely trying to get Apple's Board to represent the shareholders, something some people feel they have been neglectful of in the past. The employees typically have dumped most or all of their shares, and they have gotten millions and millions of shares over the last ten years. Apple's shareholders have to be a big part of the picture...
    4 Dec 2013, 03:32 PM Reply Like
  • Lochias
    , contributor
    Comments (161) | Send Message
     
    How does the board not represent the shareholders? They elected them. Do you not vote your own shares?

     

    Also, a long-term employee receiving shares over the years would be a fool not to "dump" a substantial portion over time. Dedication and loyalty do NOT mean 'Don't diversify.'
    4 Dec 2013, 03:51 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (2750) | Send Message
     
    With that logic, Lochias, I guess you would approve of everything a politician did once elected as long as you voted. Icahn is trying to get the Board's attention. I think he has succeeded. You think selling hundreds of thousands (and their entire holdings) was a good idea, huh? I didn't say don't diversify, but some of these guys were selling all of their options when Apple was as low as the $20s! You really think that is a good idea? The dividend is very close to their whole profit. Icahn is correct that Apple made a huge mistake in not buying the stock back through the years.
    4 Dec 2013, 03:57 PM Reply Like
  • scott trader
    , contributor
    Comments (6943) | Send Message
     
    If I were Icahn.......what is he like 86 years old..". I would be hanging out on a warm beach with my younger 57 year old blonde wife instead of hanging out on twitter....
    4 Dec 2013, 03:32 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1284) | Send Message
     
    At 86, with his knowledge and his billions I'm sure he gets a lot more pleasure making power deals then sitting on a beach. People who don't understand the rush of power that comes from mega deals will never understand what drives a man like Carl Icahn. He gets off on further cementing his legacy. Not hanging out with an old cougar on a beach somewhere.
    4 Dec 2013, 05:30 PM Reply Like
  • kimboslice
    , contributor
    Comments (1787) | Send Message
     
    I bought AAPL because I liked the management and the business. I don't want nor need meddlers like iCahn trying to interfere.

     

    Why doesn't iCahn start up a high tech company himself? Oh he has no abilties in that area, never mind.

     

    As mentioned above, a rational iCahn would be wiggling his toes in the sand at a beach in St. Barths, Nevis, or Cabo. He's not a rational guy, he's a megalomaniac head case.

     

    Either way I'll vote my shares at proxy for him to drop dead.
    4 Dec 2013, 03:41 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (327) | Send Message
     
    To be honest, Carl Icahn (and people like Buffet) have been wealthy long enough to have retired decades back. But I don't think money is the only motivation to work. As Jack Baker mentioned, power and self-worth are more important reasons here.
    4 Dec 2013, 07:27 PM Reply Like
  • VAWhiz
    , contributor
    Comments (67) | Send Message
     
    I am not interested in any additional authority to purchase Buy Backs. I just want Cook to front load the purchase of Buy Backs which are authorized; preferably before the price shoots higher.
    4 Dec 2013, 03:55 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
     
    Agreed. Not an AAPL shareholder, but all these buybacks that take place over 3-5 years....too much! Fire all of it at once when shares are at 52 week lows like they were a coupe months ago.
    4 Dec 2013, 04:00 PM Reply Like
  • flux8
    , contributor
    Comments (719) | Send Message
     
    When you're at the top, everyone wants a piece of you.
    4 Dec 2013, 03:56 PM Reply Like
  • jjkiam
    , contributor
    Comments (403) | Send Message
     
    Whether you agree with Icahn or not, his investment in Apple has clearly coincided with renewed belief in the company! Of course a lot of this is the response to the new products and the almost insatiable demand they seem to be experiencing from the consumer! Personally I welcome his pressure on the Board to put the cash hoard to more effective use! After this qtr ends, Apple will have grown that from the current level quite substantially! I can't imagine that TC and the Board will not continue to increase their investments in Capex,R&D and acquisitions. But unless they plan to buy something truly BIG, then an increase in either the dividend or buyback or both seems inevitable to me!
    4 Dec 2013, 03:59 PM Reply Like
  • scott trader
    , contributor
    Comments (6943) | Send Message
     
    Icahn should go make eggs with Bill gates. These guys need hobbies...
    4 Dec 2013, 04:00 PM Reply Like
  • flabingo1
    , contributor
    Comments (81) | Send Message
     
    One thing that could be improved is the make-up of the Board of Directors. Time to replace Al Gore and the Avon Lady with younger people like Elon Musk. Also Peter Oppenheimer with 200 million should be replaced. Carl has asked a fair question in a reasonable way. Management will have a time to respond. But if you look at their balance sheet they have very little invested in plant and equipment, so profits go to the cash accounts as they grow. WS has determined this is not a growth company based on its PE.
    Which limits it stock appreciation. So raise the dividend and accept the company as management has structured it.
    4 Dec 2013, 04:01 PM Reply Like
  • Almutawa
    , contributor
    Comments (67) | Send Message
     
    As a shareholder I would say NO. I like the feeling of knowing that my company is resting on a pile of 150 b of cash that it could use for all sorts of more profitable uses.
    4 Dec 2013, 04:04 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (2750) | Send Message
     
    That is why Carl is a billionaire. Why not be smart? Apple can be a great company with great products with happy and well compensated employees--all while being very, very smart financially! Having 150Bn making Zero in treasuries while the dividend is more than that is just plain stupid! Keep enough cash and don't put the company in danger and deploy the rest of it. In Apple's situation, and with rates as low as they are, debt is an excellent choice for using the cash. Carl likely owns more of Apple than all of the board and senior leadership team put together-they sold their stock. They need to consider his advice carefully imo.
    4 Dec 2013, 04:12 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1284) | Send Message
     
    Like 200 million dollar Acquisitions?
    4 Dec 2013, 05:24 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (2750) | Send Message
     
    Just remember earlier in the year! Apple was dead in the water--the stock was a victim--utterly helpless. Icahn bought it and began to advise the board publicly and AAPL took off. WS respects his advice and they know he is smart and they fear being on the other side of the trade against his organization. If they had borrowed another 40Bn and aggressively bought the stock back it would likely be much higher. Icahn is one of the keys to AAPL's reversal and recovery and you guys think he is the bad guy? If Apple were to put him or one of his reps on the Board it would likely go into Saturn 5 mode imo.
    4 Dec 2013, 04:22 PM Reply Like
  • 2puttwo
    , contributor
    Comments (655) | Send Message
     
    Humble, I agree with you 100%. My comment was a tweener. Kind of a joke, kind of a poke.
    4 Dec 2013, 05:19 PM Reply Like
  • scott trader
    , contributor
    Comments (6943) | Send Message
     
    @Humble. I totally agree he stepped up and bought shares during a terrible time for aapl stock....and it helped....now he needs to stand back and just count his winnings for a while....
    4 Dec 2013, 11:51 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (2750) | Send Message
     
    Scott, respectfully disagree. I think Apple needs help on finance. They make great products, and that is their knitting, but they can also be the best company in the world in finance. Buffet told Jobs to buy the stock back. If Jobs had followed his advice, Apple would be much higher imho. Icahn is telling Cook the same thing. They need to be aggressive while the stock price is in the basement. If we achieve market parity in valuation then the smart thing might be to do something else, but why wait until the price is $1000/sh to act? Right now, this morning Apple is less than a cash adjusted 10 PE for this FY, assuming CHL gets them to a very conservative $46/sh. There is still time to take action. Once the stock is $1000/sh, they can always reissue if they want to buy Intel.
    5 Dec 2013, 06:59 AM Reply Like
  • flabingo1
    , contributor
    Comments (81) | Send Message
     
    They have a very generous stock option plan for its employees. Every three or six months the employees can buy up to ten per cent of their salary at a 15 % discount of the lowest price during that period of time. And the records show how generous they are with their officers and directors. If they would split the stock, imagine how many customers would buy the stock for their children for college funds. This would reduce the power of the traders and short term investors like Icahn, with which many people have a problem.
    The government could reduce the capital gain to 5% for stock held for 5 years
    4 Dec 2013, 04:27 PM Reply Like
  • tsabar
    , contributor
    Comments (153) | Send Message
     
    Icahn to make purgatory proposal!
    4 Dec 2013, 04:44 PM Reply Like
  • mphill47
    , contributor
    Comments (602) | Send Message
     
    I say bring it on Carl. I would like to see what the response from shareholders would be. Without Carl I'm afraid that APPL would be dead money for some time.
    4 Dec 2013, 05:03 PM Reply Like
  • szeducate
    , contributor
    Comments (198) | Send Message
     
    I agree with Icahn, however too much of the discussion is about him and not the issue. If Apple is sitting on $150 in cash, and the pile is growing every quarter, I would like to see them do something useful with it. But that pile has been growing greatly of the last few years and all of their acquisitions are in the hundreds of millions NOT billions of dollars. So if I am an owner of the company as a shareholder, I want them to do something with it, and that is up to the company. But to just let it sit there, sorry folks I do not agree with that.
    4 Dec 2013, 05:16 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    szeducate, agreed. ad hominem attacks against Icahn add nothing to the discussion. Whether you like him or not, it's the idea of share repurchases that needs to be addressed. Either Apple is undervalued and a great buy at current prices AND Apple has excess cash, or Apple is not a good buy or does not have excess cash. I tend to think Apple is a good value (though not as good as it was when the idea was first floated) and that Apple has the excess cash to buy back it's shares. The question is, does Apple repatriate the money and take a 35% hit, or does it use it's cash as collateral to borrow at an extremely low rate to buy back it's shares. Borrowing appears to be the cheaper route.
    4 Dec 2013, 06:20 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1284) | Send Message
     
    It's astonishing to me how many shareholders oppose an idea that would release shareholder value. Aren't people in this stock to make money? Unless you are short Apple, why would any long oppose a reasonable buy-back? The feckless Apple board should have been doning these things long ago. I presume shareholders are happy about the current dividend and buy-back. Do you think either of those things would be happening now if it weren't for pressure from Wall Street People like Einhorn? No, they would not.
    4 Dec 2013, 05:22 PM Reply Like
  • scott trader
    , contributor
    Comments (6943) | Send Message
     
    I agree JB... should have been buying back at sub 400
    4 Dec 2013, 05:29 PM Reply Like
  • xrugr
    , contributor
    Comments (70) | Send Message
     
    JB and ST, agreed. I always thought I had missed the boat with Apple. I would get interested after huge run-ups and think I had missed it, and was too late to the party, so I would never buy the stock. I wasn't following the stock closely, but knew it was falling and I didn't want to ride it down, but when the stock went under $400, I decided to go long. It just seemed too good to pass up. Even I could see the stock appeared to be undervalued. I think Icahn is right. Apple stock in the low $400s was undervalued and a stock buyback would have been a great use of it's excess capital.
    4 Dec 2013, 05:56 PM Reply Like
  • Rick Wurster
    , contributor
    Comments (12) | Send Message
     
    For some odd reason I read his comment as saying he was going to make a "predatory" proposal --- but we all know Carl isn't like that.
    4 Dec 2013, 05:42 PM Reply Like
  • Keyser Smith Jones Soze
    , contributor
    Comments (101) | Send Message
     
    God forbid that Apple should ever return any capital to investors. That would be blasphemy. Better to spend it buying share of OTHER companies, even buy them outright, no matter that they are nowhere near the bargain that Apple is, even after the recent runup. It will remain a bargain at least until it returns to $700, and probably even after that. Anytime that Apple's PE is below 20, it is a steal.
    4 Dec 2013, 05:42 PM Reply Like
  • dbt01
    , contributor
    Comments (592) | Send Message
     
    $50B seems reasonable to me. Apple could fund half with cash on hand and borrow at less than 3% the other half. It would reduce outstanding shares by about 12% and would not really hurt the balance sheet as that is basically what Apple makes in free cash flow every year.

     

    Earnings in 2015 will be 12% higher due to the reduced share count.

     

    This idea is not terrible.
    4 Dec 2013, 05:42 PM Reply Like
  • twinloon
    , contributor
    Comments (3) | Send Message
     
    Quitting criticizing Icahn, he actively promote stock buyback with excessive cash, he does what no other shareholders will ever do. I don't think you or average shareholders will dare to speak, I recalled some shareholders spoke out about excessive cash in early 2013 and was flatly ignored. Icahn did something good for shareholders, good for him, good for me, probably not at $150B, but should be somewhere near $100B cash level.
    4 Dec 2013, 05:43 PM Reply Like
  • User1598
    , contributor
    Comment (1) | Send Message
     
    '' Icahn, meanwhile, has been pushing for a $150B expansion of Apple's buyback program, and has said he would "test the waters" regarding a proxy fight if the company ignored his calls.''

     

    Can someone please explain this quote?
    4 Dec 2013, 05:43 PM Reply Like
  • brent999
    , contributor
    Comments (19) | Send Message
     
    Are you poking fun at Scott Trader or joking?
    4 Dec 2013, 08:13 PM Reply Like
  • scott trader
    , contributor
    Comments (6943) | Send Message
     
    Icahn needs to buy Pfizer and get a lifetime supply of Viagra and quit playing around with Apple..?..
    4 Dec 2013, 11:45 PM Reply Like
  • flabingo1
    , contributor
    Comments (81) | Send Message
     
    Icahn is entitled to having a microphone. All he said and put up money, is that Apple is undervalued. To raise the PE, it will not happen without reducing its cash reality and tell the stockholders of a plan to use its cash to earn more than 1% on its excess cash
    4 Dec 2013, 10:33 PM Reply Like
  • SaltyDog62
    , contributor
    Comments (835) | Send Message
     
    Problem is Ichan is only in it for a short term pop in PPS and then he is out with his profits. Ok no more dinky jokes...
    5 Dec 2013, 01:35 AM Reply Like
  • GDATL
    , contributor
    Comments (8) | Send Message
     
    AAPL is a healthy company that increases its profits year after year. It has good management that cares about the long term. Stockholders who want something else or don't trust management can take their money elsewhere. I'm happy with a solid investment that gives me a decent return and good appreciation. As far as the huge cash hoard, I have no information about Cook's plans, but they may be planning a big move. Icahn is not the kind of person I would want running a real company that sells a real product. He only cares about extracting as much money as possible, leaving the bleeding carcass for eventual burial.
    5 Dec 2013, 02:11 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs