Neil Hughes
Apple's massive share buybacks continue, as the company notified the U.S. Securities and Exchange Commission on Tuesday that it is planning up to a 10-part bond to further finance its capital return program, in addition to funding corporate acquisitions.
As of the end of last quarter, Apple had completed over $153 billion of its $200 billion program, including $110 billion in share repurchases. During its quarterly earnings report, the company promised to be "very active" in U.S. and international debt markets this year, and began to deliver on that promise with Tuesday's filing.
The joint book running managers for Apple's latest bond sale are Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank Securities, and J.P. Morgan. The filing reveals Apple is planning to sell up to a 10-part bond, but the amount of funds was not disclosed.
But a source familiar with Apple's plans indicated to Bloomberg that the sale will be a multi-billion-dollar offering, with some bonds maturing in 30 years. In addition to share buybacks, the money will also be used to fund acquisitions and other "general corporate purposes."
Apple's 30-year bond is expected to issue seven-year green bonds to back environmentally focused initiatives, such as clean energy.
Apple's most recent bond offering came last September when it issued a euro-denominated sale worth more than $2.25 billion U.S. The company also had bond sales last year denominated in Japanese yen, Swiss francs, British pounds, and Australian dollars.
Charles Martin
Christine McKee
Malcolm Owen
13 Comments
I understand there are some near term drivers, such as keeping money oversees and taking advantage of current interest rates...but I wonder what some of the long term less obvious drivers are for Apple issuing bonds when they are sitting on so much cash. I have a few thoughts... 1. getting more income focused, conservative investors, invested in Apple's future (for 30 yrs!) to keep interests of banks aligned with Apple's continued success. 2. governments will buy bonds, perhaps this will soften government hurdles/regulations against Apple when they try to operate and expand oversees. 3. keeps them supremely liquid and cash rich...although to what end I'm unsure...but they can spend out this cash over 30 yrs on their bond paybacks...
Apple's financing is actually quite creative:
http://www.businessinsider.com/apples-plan-buy-back-plan-is-saving-despite-debt-2015-12?amp
The markets are currently irrational with respect to APPL shares, so in my view it is a buying opportunity (PE below 10, excellent cash position, and record sales and earnings). The fear is that Apple has lost momentum (that being defined as a high growth line going forever, at least in analysts minds). Nothing goes up in a straight line forever, but Apple has many segments of its business that will accelerate as the number of devices has exceeded 1 billion. Apple also has the opportunity to "crack" a number of very large markets (IoT and financial being only first two that come to mind) going forward.