Dec 27, 2018

WSJ Says Apple's Stock Buyback Was A Failure, But We Oppose

A report from the Wall Street Journal today said that Apple’s $62.9 billion stock buyback program in the first half of this year was a bad investment. Meanwhile, the reality is that the publication overlooked and failed to see the actual result of what could follow when a company retires its stock shares.



According to the report, which uses Apple as an example to emphasize companies' capital investment for the buyback program after the US federal tax cuts. It asserts that the $62.9 billion that Apple spent on repurchasing its own share is now worth only $54 billion, suggesting today's share repurchase can lessen the loss of $9 billion.

However, the report rarely mentions that these stocks have been retired by the firm and no longer have any direct monetary value. In the meantime, there are several benefits to Apple: it meant to reduce the share count, double the value of dividends per share paid to investors, as well as give the management team full confidence in the future investment

Many US companies, including Apple, have been accelerating stock buybacks after the US tax cuts and employment bill (from 35% to 21% in December 2017), while Apple and other Fortune 500 companies in the US Transfer overseas cash back to its own country.

Image Via TechCrunch

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