Proxy advisory firm recommends siding with Apple against Icahn

Proxy advisory firm recommends siding with Apple against Icahn
On February 28th, Apple stockholders will vote on a proposal by investor Carl Icahn that Apple buy back $50 billion worth of its stock. Icahn, who owns more than $4 billion of Apple shares, originally wanted Apple to buy back $150 billion of its stock before cutting his demands. ISS says that the proposal would "micromanage the company's capital allocation process."

ISS didn't let Apple off the hook, however, addressing Apple's failure to let stockholders know its long term plans for its cash hoard, which is up to $160 billion. It isn't like CEO Tim Cook has been opening the vault to jump through all of the money ala Scrooge McDuck. As Cook recently pointed out, Apple has repurchased $14 billion in stock over the last couple of weeks, taking advantage of the huge drop that the shares had after Apple sold 4 million fewer iPhones than Wall Street expected last quarter. For the last year, Apple has repurchased $40 billion of its own stock, a record for any company.

Besides ISS, smaller proxy advisory firm Egan Jones also recommended that stockholders vote against Icahn. The investor is hoping that Apple buys the shares, which would cancel them. That lowers the number of outstanding shares, marking a shift in the supply-demand balance. Those investors who borrowed Apple stock and sold it in hopes that it would fall (a transaction known as selling short) might feel pressure to return the shares they borrowed by buying them back in the market, a process known as a short squeeze. Lastly, by removing $50 billion of Apple's stock outstanding, certain metrics used by fundamental investors, such as the P/E ratio, would be affected, making the value of Apple's stock look cheaper by certain standards.

The bottom line is that Icahn wants the stock to rise so he can sell his shares at a profit. Like any merchant with a product to sell, he needs to create demand for the stock so he can have it taken off his hands.

source: MarketWatch via AppleInsider

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6 Comments

1. jellmoo

Posts: 2660; Member since: Oct 31, 2011

They sold 4 billion fewer phones than expected? I know Apple sales are great, but maybe billion isn't the right word there.

2. jellmoo

Posts: 2660; Member since: Oct 31, 2011

Annnnnnnnnnd... Stealth edit.

4. cnpthe3rd

Posts: 103; Member since: Feb 01, 2009

read it again, it says "Apple sold 4 million fewer iPhones than Wall Street expected last quarter."

5. UglyFrank

Posts: 2194; Member since: Jan 23, 2014

That was the stealth edit

6. androiphone20

Posts: 1654; Member since: Jul 10, 2013

vote negative and tell icahn 'iCant'

8. kindlefireowner

Posts: 504; Member since: Dec 05, 2011

This article is above Fandroids heads, and left out some important facts. Apple sold 51 million iPhones for the quarter. Which is the most iPhones they ever sold in a quarter. Also, this article is about Apple sharing the $150 billion dollars in profits with their shareholders. Apple is only sharing $15 billion. So this is not an article about Apple falling off. Ichan wants some of that $150 billion dollars of profit that Apple has banked.

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