Just a bit more than two weeks before Apple stockholders were set to vote on his proposal, Carl Icahn has given up. The investor, who currently owns more than $4 billion of Apple's shares, was asking holders to vote on a non-binding proposal that Apple buy back $50 billion in stock. Icahn revealed the turnaround in an open letter to Apple stockholders.
In his letter, the investor quoted proxy advisory firm ISS, and stated that with Apple on a pace to buy back $32 billion in shares this year, there was only a small $18 billion difference between both sides. Apple CEO Tim Cook recently revealed that Apple took advantage of a decline in the company's stock to buy $14 billion of shares
over the last two weeks. During the last year, Apple has purchased $40 billion in stock, a record for any company. The decline in the stock came after Apple's last earnings report revealed that fewer iPhones were sold than expected
by Wall Street.
Icahn is not known for staying in an investment for too long. Apple might be an exception. At the end of the open letter, the investor said, "[I]n light of Tim Cook’s confirmed plan to launch new products in new categories this year (in addition to an exciting product roadmap with respect to new products in existing categories), we are extremely excited about Apple’s future
Proxy advisory firms like ISS had recommended that Apple stockholders vote against Icahn's proposal, while Apple stockholders like Calpers (California Public Employees’ Retirement System) also objected to it. For an investor like Icahn to back off a proposal without a guarantee of a profit, he truly must be optimistic about Apple's future. Either that, or he is trying to project to other investors a confidence in the company so that the shares will rise, giving Icahn an exit strategy.
CARL C. ICAHN
767 Fifth Avenue, 47th Floor
New York, New York 10153
February 10, 2014
Dear Fellow Apple Shareholders,
While we are disappointed that last night ISS recommended against our proposal, we do not altogether disagree with their assessment and recommendation in light of recent actions taken by the company to aggressively repurchase shares in the market.
In their recommendation, ISS points out, and we agree, that “on the spectrum of options for allocating capital, the board appears to have been sluggish only in returning excess cash to shareholders,” and even though the company has in place “one of the largest buybacks in history” we agree with ISS that this effort seems “like bailing with a leaky bucket” when “given the scale of the company’s cash reserves.”
That being said, we also agree with ISS’s observation, taking into account that the company recently repurchased in “two weeks alone” $14 billion worth in shares, that “for fiscal 2014, it appears on track to repurchase at least $32 billion in shares.” Our proposal, as ISS points out, “thus effectively only asks the board to spend another $18 billion on repurchases in the current year.”
As Tim Cook describes them, these recent actions taken by the company to repurchase shares have been both “opportunistic” and “aggressive” and we are supportive. In light of these actions, and ISS’s recommendation, we see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested repurchase target.
Furthermore, in light of Tim Cook’s confirmed plan to launch new products in new categories this year (in addition to an exciting product roadmap with respect to new products in existing categories), we are extremely excited about Apple’s future. Additionally, we are pleased that Tim and the board have exhibited the “opportunistic” and “aggressive” approach to share repurchases that we hoped to instill with our proposal. It is our expectation that Tim and the board continue to exhibit this behavior as fiduciaries to the shareholders since they clearly seem to agree that our company continues to be extremely undervalued, and we all share a common optimism with respect to the company’s bright long term future.
Carl C. Icahn