Icahn takes advantage of Apple's falling stock price and buys another $500 million of the shares

Imagine being able to call your broker to buy $500 million of Apple's falling stock. That is exactly what billionaire investor Carl Icahn has done this morning, according to a tweet sent out by the activist investor. That title doesn't mean that Icahn likes to support causes, other than his own wealth. He is an activist in the sense that he likes to buy shares in a company to gain some sort of "in" with the board, and then makes suggestions that will bring a temporary rise in the price of the stock. Once that happens, Icahn is gone like the wind, leaving long term investors holding the bag.

The former options trader and Arbitrager (hence the love of short term profits) is demanding that Apple borrow $150 billion at low rates, and use the funds to buy back $150 billion of it's own stock. That would accomplish two things. It would reduce the number of shares available for purchase, changing the supply-demand balance of the stock, and raise earnings per share figures.The latter is used to determine the P/E ratio, which is a rather off the cuff way of determining if a stock is cheap or dear. Icahn has said that such a buy back would raise Apple's share price by 33%. A vote on the buyback is included on the proxy ballot that shareholders will receive for the annual meeting on February 28th. Apple suggests that holders vote against it (natch!).

Today's purchase of Apple shares by Icahn was done as the stock has tumbled 7% after Apple disappointed investors on Monday. In the last two weeks, he has added over $1.5 billion worth of Apple stock to his portfolio, and now owns more than $4 billion worth of the stock.


source: @Carl_C_Icahn