Open letter from Icahn to Cook asks Apple to tender for $50 billion of its own shares

Open letter from Icahn to Cook asks Apple to tender for $50 billion of its own shares
An open letter sent yesterday by investor Carl Icahn to Apple CEO Tim Cook, was made public today. The missive first praised the executive by calling him the ideal CEO for Apple. Icahn then explains why Apple is considered undervalued in his eyes. Because the investor doesn't expect this undervaluation of Apple to last long, he says that there is a limited window of opportunity that has presented itself, for Apple to tender for a large number of its own shares.

Icahn, who says in his letter that he owns 53 million shares of Apple, believes that the company is worth more than twice what it is trading for today. In fact, he puts a $203 price tag on the stock, which is currently trading at $101.50. By buying back its own stock, Apple would be retiring it, which would lower the number of outstanding shares. That would automatically raise certain metrics used by some investors, like earnings per share. Conversely, it would lower Apple's Price/Earnings (P/E) ratio making the stock seem undervalued to some mutual funds. The bottom line (which all Icahn is interested in) would be a higher stock price for Apple. Icahn promises not to sell or tender his shares to Apple, allowing the small investor to have more of his stock purchased in the buyback.

Last December, Carl Icahn managed to have his proposal for a $50 billion share buyback listed on the proxy form for stockholders to vote on. But before it could be voted on, CEO Cook used a drop in the price of Apple to buy back large chunks of stock, which shut Icahn up for a brief period of time. But the former options trader is at it again, and with today's open letter he is once again demanding that Apple buy back $50 billion of its own shares. We're pretty sure that Cook will continue to hold fast, spurning Icahn's request. In the 1980's, Apple would be paying off Icahn, buying his shares back at a premium. That was a process known as Greenmail, and no one did it better than ol' Carl. But these days, both sides will most likely sniff each other, looking like two heavyweights in the first round of a title fight. Will there be a winner? Eventually one of them will blink, but it might take a long time before that happens.

source: CNBC

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16 Comments

1. Zenzui

Posts: 114; Member since: Feb 13, 2012

Wow this guy....He wants to earn those money in easy mode lol

13. neops

Posts: 297; Member since: Jan 28, 2014

Moving money in arms industry?

2. sprockkets

Posts: 1612; Member since: Jan 16, 2012

This guy is an asshole. Tell him to GFH.

3. snowgator

Posts: 3614; Member since: Jan 19, 2011

Short term profits are so hard to come by for these poor investors. I am a "more power to ya" kind of guy. Go get the cash. No sweat, I am happy for ya. But seriously.... telling Apple it's financial business is a little like trying to school Sammy Hagar on how to throw a party and drive fast. This dude is talking to the masters of making money.

4. bucky

Posts: 3774; Member since: Sep 30, 2009

Someone needs to put him in his place I think. I'm preparing an open letter as we speak. Phonearena, please put this in today's featured items.

5. sprockkets

Posts: 1612; Member since: Jan 16, 2012

And for those who hate him, look forward to the time when he'll be throwing his money on the street when it becomes worthless.

6. kindlefireowner

Posts: 504; Member since: Dec 05, 2011

I own Apple stock, If Ichan can get Apple shares to $200 a share by 2016? I'm all in. But I'm not holding my breathe. It's not 1999/2000. But Apple should raise the dividend. Which would make Carl millions.

7. tedkord

Posts: 17133; Member since: Jun 17, 2009

Icahn is a self interested asshat. I hope whatever Apple does, it costs him billions.

8. synot

Posts: 277; Member since: Sep 14, 2012

Business deals like these causes recessions in America

9. ojdidit84

Posts: 462; Member since: Jul 16, 2011

Jackasses like this guy need to be dropped off on an unmapped desert island in the middle of the south Pacific somewhere and forgotten about.

10. DnB925Art

Posts: 1167; Member since: May 23, 2013

What's wrong with him? He wants to milk as much money from Apple as he can, just like Apple wants to milk as much money as possible from it's customers. /s ;P

11. kindlefireowner

Posts: 504; Member since: Dec 05, 2011

Did I miss the memo? When did making money becoming a bad thing in this country.

12. Augustine

Posts: 1043; Member since: Sep 28, 2013

When it's at the expense of others. What this conman is saying is that Apple buys his shares, to waste its capital to prop up sometime who adds no value to Apple whatsoever.

14. kindlefireowner

Posts: 504; Member since: Dec 05, 2011

You do understand that Carl is pushing for Apple to buy back more shares than they intended, which will increase the value for all Apple shareholders. Not just Carl. That's not a bad thing.

15. Augustine

Posts: 1043; Member since: Sep 28, 2013

It depletes the balance sheet to temporarily prop up stocks. Go and check the history of shares buy back. They have the nasty habit of soon falling lower than before they were bought back. It hurts the value for everyone holding that stock, but not Carl, who by then will have already divested of his shares. This is a blatant attempt at manipulating the market. Why doesn't Carl but thousands of Apple shares with his own money instead of Apple's? This would lift the prices temporarily too.

16. kindlefireowner

Posts: 504; Member since: Dec 05, 2011

Full Disclosure. I own Apple stock. You do realize even after repurchasing $50 billion dollars of stock, Apple is still sitting on over $100 billion dollars of cash. So Apple is not getting depleted. I rather see Apple raise then dividend myself. I own some Berkshire B shares, that stock buy back worked out pretty well for Warren Buffet. Yes, the results may vary from company to company, but Apple generates a ton of cash.

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