Apple Inc.’s shareholders might have to thank none other than Carl Icahn for his activism, which has propped up the company’s share price significantly, as the tech giant has begun offering dividends and carrying out ever bigger share buybacks to appease its shareholders, financial media platform Bidness Etc said on December 22.
Apple has been using most of its giant cash reserves to buy back outstanding shares from the market for some years now; however, it has been doing so at an accelerating rate over the last three years due to the pressure Mr. Icahn is putting on Apple to offer more to its shareholders, the report said.
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The company has already committed to review its share buyback program every year to appease the activist shareholder. Apple is the biggest buyback spender this year among the S&P 500, having spent more than $56 billion in share buyback on a trailing 12-month basis, as of the end of the third quarter, Bidness Etc said.
In April, the company announced it would undergo a 7-for-1 stock split, and its stock rose 8% in after-market trading the day it happened. However, Mr. Icahn continued to insist that the stock was still heavily under-priced, pushing Apple CEO Tim Cook via an open letter in October to increase the share buyback program to $100 billion, a move that would increase the value of all outstanding Apple shares significantly. There was a polite acknowledgement of the letter by the company at the time; however, the increased pace at which the company continued to carry out its buyback program indicates that Apple was, after all, acceding to the investor’s demands, according to the report.
The activist investor has continued to mount pressure on the company, with the open letter citing that Apple shares were supposed to be worth $203, nearly 90% higher than their current value in the open market. Having already spent $56 billion on share buybacks and amid strong sales for iPhone 6 and 6 Plus, accompanied by high expectations surrounding the Apple Watch and Apple Pay, the company is expected to enter 2015 on a high, as shareholders get increasingly high returns on their holdings. There are already projections that Apple will become a stable $700 billion dollar company in the near future, an estimate that is shared by various investment banks willing to bet aggressively on the future of the stock, even as it continues to fluctuate relatively violently on the stock exchange, Bidness said.