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back to article Dell nemesis Icahn offers Apple's Tim Cook slap-up grub in share buy bid

Investor Carl Icahn - best known for trying to stop Mike Dell from taking Dell the company private - has applied more gentle pressure to Apple boss Tim Cook to get the chief exec to beef up the iPhone maker's share buyback. During the Nasdaq outage, Icahn tweeted that he'd been chatting to Cook and was planning a dinner with the …

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I'm not an investor but...

Is what he is doing legal? I mean, wi his clout it seems he is manipulating the market with his tweets... For example.... He could buy a couple of (hundred) million in shares... Tweet about buy back which would raise the price, then sell off... Wash and repeat... And with his shady Dinner with Tim (TM) isn't this an argument for insider trading... Please will somebody knowledgeable about such things enlighten us to what effect Icahn and his cronies are having on the market by investing tonnes of wonga and tweeting incessantly about Apple's future plans.

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Re: I'm not an investor but...

Funny I was thinking the exact same thing...

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Anonymous Coward

Re: I'm not an investor but...

Supply and demand, restrict demand to attempt to hike up the cost?

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Anonymous Coward

Re: I'm not an investor but...

where's the DoJ when you need them?

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MrT
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Pump and dump...

... but not in the traditional "micro" sense of the term...

Icahn plz haz all ur applz etc.

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… no.

MrT, there are copious amounts of non-Icahn-based information available on AAPL through which people can make their own judgements on whether to buy, hold, sell, short, &c. AAPL stock. Even though he has dined with Cook, Icahn is not an Apple insider. This isn’t pump-and-dump.

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WTF?

"He told Reuters last week that he reckoned Apple could withstand a $150bn buyback programme if it borrowed some money"

This proves that I'm too thick to work in finance, I mean why would a company with ~$170bn in the bank want to buy back $150bn of it's shares BUT have to get a loan to do it! I must be missing something somewhere in all this lot

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Unhappy

I'll start with my disclaimer again. I am not an investor, but...

One presumes that they'd have to repatriate all the money in order to buy back shares. I have no idea what the going tax rate for such an undertaking is, but I suppose from his statement it would levy a greater than $20bn charge, requiring borrowing.

More likely is Icahn is hoping Apple would use their cash as collateral to borrow a truckload of money at a rate of interest which would incur a far lower charge than repatriation would, keeping their "war chest" more or less intact, just like they did recently.

Still, it seems likely - to my naive, non-investor eyes at least - what Icahn's after… He "invests" a couple of bill in Apple shares and manages to convince Tim to buy them back. Since buybacks often (temporarily) inflate the share value, Icahn profits.

This is repeated until it becomes clear that Tim is not stupid enough to buy back such a preposterous and pointless number of overvalued shares ($150bn what the serious fuck?) when in fact their track record shows that they actually tend to only buy when the shares are nicely undervalued by the market... At which point, investors turn bearish as/and price declines. Whereupon, -just by sheer coincidence it happens to turn out that- Icahn has in fact shorted Apple for a couple of billion and profited again.

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re: manages to convince Tim to buy them back.

Doesn't even need to do that. Just needs to pump the stock up to a higher price, and sell to the stooges silly enough to have bought on his rumor making.

So to the first poster, yes it is a "pump and dump" scheme, it's just one that is within the boundaries of the law.

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Why?

I suppose the theory goes that if you buy AAPL, you value the company more highly than the cash. But a third of your cash is used to buy Apple's cash. So if Apple buys back shares with its cash, the remaining shareholders own a bigger share of the company for no more money. Most of the cash is offshore, where it can be used to buy entire factories, fabs etc for suppliers to operate risk-free but reserved for Apple. That cash repatriates in the form of non taxable depreciation. If it's repatriated as cash there's currently a big tax bill to pay. So by borrowing the money, the evil tax bill is deferred, but the shares are bought back, and the original cash is still available to change the world. The downside is the interest on the borrowing. But that's actually free, because the money buys back shares on which the company was paying a dividend, and the interest payments are also tax deductible where the divi's weren't.

So if the share price stays the same or goes up, it turns out to be a brilliant idea. But if it goes down, you've pissed away the company's cash for nothing (like Dell). Check yahoo finance for the net tangible assets compared to market cap on the balance sheets of Dell, HP, and Apple. Icahn wants to make Apple more like Dell. I'm not convinced.

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Dear Apple, You are stoopid. Use your money to make my shares worth more, Love, Carl

Dear Apple, You are stoopid. Use your money to make my shares worth more, Love, Carl

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