Did Icahn’s Position Disclosure Hurt Apple’s Bonds?
Last week billionaire investor Carl Icahn sparked a surge in Apple’s (NASDAQ:AAPL) stock price with his disclosure that he has a “large position” in the company. Although Icahn’s Apple tweet boosted Apple’s stock value, it also may have had less of a positive impact on the Cupertino-based company’s bonds. Icahn’s recent discussions with Tim Cook suggested that Apple may significantly increase its share buyback program.
This was widely seen as a negative for Apple’s credit and the news soon affected the basis point spread of the tech company’s bonds. Investors who bought into Apple’s $17 billion bond offering in April continue to take losses thanks to the widening yield spread. According to MarketAxess data cited by MarketWatch, Apple’s 10-year bond spread widened to 92 basis points by August 20. Apple’s 10-year bonds were originally issued at 75 basis points.
“Basically if you own this paper, you’re sitting on it for three years or selling at a loss,” First Investors Management senior portfolio manager Rajeev Sharma told Reuters. Apple issued $5.5 billion worth of senior unsecured 2.4 percent 10-year bonds in April.