Apple Investors Happy Icahn Has Called His Dogs Off

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On November 14, 2013, Icahn Associates filed its Form 13F with the U.S. Securities and Exchange Commission. This Form 13F listed out the Icahn investment vehicle holdings as of September 30, 2013. The report immediately sent Silicon Valley and Wall Street commentators into a frenzy, as it revealed that Icahn had purchased 3,875,063 shares of Apple (NASDAQ:AAPL) stock during the summer quarter. At that time, Icahn and his affiliates held $1.8 billion worth of Apple shares, which also calculated out to less than 0.5 percent of the consumer electronics company.

Still, Icahn felt well within his rights to launch a public campaign calling for Apple to improve shareholder returns through financial engineering. After a dinner meeting with CEO Tim Cook, Carl Icahn took to Web 2.0 and attempted to browbeat Apple to immediately purchase $150 billion worth of its own stock. Last February, titans Icahn and Cook effectively negotiated a compromise, as Apple accelerated its original buyback plan through a market correction. For now, Wall Street traders appear pleased that Carl Icahn, billionaire activist investor, has called off the dogs at Cupertino.

Carl Icahn’s Original Plan for Apple

Apple financial managers are tasked with making decisions upon whether to retain earnings and reinvest into the business, or to return capital back to shareholders through dividends and buybacks. Technology firms and expanding concerns typically retain the majority, if not all of capital in an attempt to better reward investors through long-term share price appreciation. Alternatively, mature businesses, such as utilities, return the majority of profits back to investors because these companies lack real growth opportunities. Apple, of course, was largely hailed as a growth company throughout the days of the late Steve Jobs. In recent years, Jobs and Apple brought the revolutionary iPod, iPhone, and iPad platforms to market. On July 24, 2012, Apple actually paid out its first dividend in seventeen years.

The initial saber rattling out of Carl Icahn may suggest that the billionaire investor believed Apple’s growth story had already come to a close. Again, Carl Icahn’s original plan called for Apple to immediately purchase $150 billion of its own stock. Last October, Icahn addressed a letter to Tim Cook through his Shareholders’ Square Table website, where the wealthy investor portrays himself as a Robin Hood type character. Icahn then proposed a $525 per Apple share tender offer out of Cupertino, which was to be financed through both cash and debt. Icahn also presented back-of-the-envelope calculations that amounted to 33 percent price appreciation in shares, if Apple were to have committed to his ambitious buyback plan. Carl Icahn, in fact, went so far as to suggest that his $150 billion buyback proposal be put up for non-binding shareholder vote.

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