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Apple Talking With Investors About $15-16 Billion Bond Offering
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It's not an Apple law. It's an American law, and it has been that way for a long time.
What about Exxon Mobil?
What about Fox, Clear Channel, or News Corporation?
If Apple, through international hocus pocus of derivatives and etc, is the primary buyer of these bonds then that is OK. If not this sucks $15B away from other businesses that could use capital investment all the while Apple's money is locked away in some double-irish with Netherlands twist with a Bahama backflip lock box.... that doesn't investors or anyone else any good.
Apple has stashed all this money away into tax havens, but can it get out ?
Apple's subsidaries in the US (NASDAQ) and Gemany ( Frankfort market) can clearly buy Apple stock. With hocus pocus financial instrutments it should be possible for the big International investment banks to sell an apple stock instrument in a wide variety of countries. ( It is likely being done with this bonds).
Humorous that the taxes are evil buy paying these banks 1% of the whole deal for all the hocus pocus is OK. ( Yeah, yeah it is less than the tax rate but frankly one reason the finanicial industry is being paid here is because they squirelled the money away where they'd have to get paid again to get it back out. )
Apple is a multinational company. They pay taxes in several countries. The USA, almost alone in the world, double-taxes income made in another country and "repatriated" back home. The tax rates apply to all companies regardless of value. So the little guys, including me, are being hurt worse.
Apple's return on capital is around 20% and the expected cost of these bonds is in the range of 1-3%, depending on duration. Apple would be wise to maximize duration in these market conditions. With over $6T in investments on the sidelines, this is a trivial impact on investment markets generally. Even if they eventually increase offerings to $100-200B.
Rocketman
https://forums.macrumors.com/showthread.php?p=17185677#post17185677
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Apple has the billions. But they're not in the US -they're overseas. Apple, the corporation, located in the US, must use US dollars to pay the money to investors. However, to get the money back to the US, Apple would have to pay a 35% tax. It's a lot more beneficial for Apple to wait for a tax holiday where they can pay 0% or something close to that (which will come someday when a republican is in office). Apple can then get a loan for the money CHEAPER. Any interest rate below 35% is cheaper than bringing the money back.
It'd be similar if you, say, won the lottery in Canada. Keep that money in a Canadian bank, and use the money over there, don't bring it across the border into the US, and you won't have to pay US taxes on it. (Canadian taxes on lottery winnings is 0%). Get a loan for the money if you want to use it in the US, and make payments from the canadian bank on the loan.
As growth declines the debt ratio of a company increases. This is simple corporate finance.
The stock buyback program is the way to go. I never got it, why Apple started paying dividends.
Dividends attract the wrong kind of investor (stockholder).
Uh, I love corporate finance. This is the discipline where I "think different"
I am curious what's coming next.
I'm not saying it's Apple's laws, I'm saying they should be bringing in the money they already have into the US and paying the tax on it. If Apple can afford a multibillion dollar HQ building they can afford to pay some taxes like the rest of us, and that goes for any corporation operating here.
Is it possible that Apple artificially DEflated its stock value by sending false signals to investors about porudct delays, withholding new product information, etc., and their plan all along was to temporarily drive down the stock price so they could buy it back and make a killing?
As an American company it sure is! I can't understand why it's possible for Apple or any other US corporation to use these loopholes to avoid paying taxes. I sure wish there was a magic loophole for me to avoid my taxes and maybe my student loans.
Apple does business in many more countries than the US. Apple just paid $3.4 in income taxes this last quarter. They aren't "avoiding" taxes.
You don't think all the finance people at Apple and the SEC know what they're doing? A company, especially of this size, will exercise every angle to maximize their profit and minimize their loss in all aspects, including investments, bonds, stocks etc.
For people outside of that inner financial circle to arm-chair quarterback what they're doing seems oddly silly to me.
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Mod Note: This thread was closed temporarily for cleanup. Instead, the moderation team decided it was better suited in the PRSI forum and, thus, we have moved it here.
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I understand the reasoning, but, as Steve Jobs found, debt can tie your hands in a lot of ways. As does the expectation of certain investors that you will pay a steady dividend. What all this signals to me is that Apple is becoming staid. Too bad.
I think we are all ignoring MASSIVE tax advantages of having debt AND keeping money offshore.
Welcome to America, where the whole economy is based on debt and leverage
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Brilliantly put, thank you!
May I add: Nowadays interest rates are super low, with their 'credit score' they will get a killer rate. Sometimes borrowing cheap beats paying cash.
Why? That's money made in other countries. If we want to be "fair" about it, Apply should invest that money back into whatever country gave it to them. Instead, they don't need the money from any of these countries to move around right now, so why should they move it to the US before they need, and pay a tax? What if after moving it they want to use it in the country of origin? In no way does moving that money to the US before they need it make any sense.
Yes, I can hear you saying "But they are taking out a loan, obviously they need it!". In which case I'd say that a loan will cost them less money in the end than paying that tax. Capitalism would dictate that they don't just give money away without reason.
But since there is no "fair" in capitalism, this is all a moot point
If that's true then it's almost like free money since the 2.4% should be less then the inflation over that time period.
Apple is owned by the shareholders. Apple's cash is also owned by the shareholders. And right now, Apple has so much cash there is nothing they can do with it that would improve Apple's business, which is why they are looking at giving some of that cash to the owners of the business.
There are in principle two ways that can be done: By paying dividends (each shareholder gets lets say $10 per share; since $10 per share disappears out of Apple's bank account, the share price drops by $10, which is fine because the shareholders now have $10 in their pocket, plus a share that is worth $10 less than before). Or by buying back shares (Apple buys back shares for let's say $400 per share. With each share bought back, $400 disappears from Apple's bank account and Apple is worth $400 less, but the value of the company is divided by one share less, so the price per share is unchanged).
So really this share buyback shouldn't make any difference to the share price. It would make a very short term difference because every buyer moves the price up a tiny bit, every seller moves it down a tiny bit, so Apple buying lots of shares back moves the price up a little bit. But if you look how many Apple shares are traded everyday, that won't make much difference.
HOWEVER if Cook thinks that Apple is worth more than $400 a share, let's say $500, then every time a share is bought back the value per share goes up. That's because (if he is right) someone was stupid enough to give up a share worth $500 and got paid only $400. On the other hand, if Apple was worth $500 then a buyback a while ago when the share price was $700 would have been stupid on Apple's side, because they would have given people $700 for shares worth $500. Still, even a $60billion buy back wouldn't make that much difference.
No, the real reason for this buyback is to get rid of cash.
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If that were true and could be proven, someone would go to jail for it. So I think nobody at Apple would do that.
Because I would stop buying Apple products, and so would many others. I don't have the slightest interest in the US economy. Now paying some more taxes in Britain on the other hand, that would be an excellent idea.
No, the top rate is 35%. The effective rate is way below that, especially for a repatriation of offshore funds, given the credit for foreign tax paid. I'd be shocked if the effective rate is more than 10%. Even so, borrowing the money is still cheaper.
I'm laughing at all the remarks suggesting that Apple bring some of that $145B in cash back to the U.S. for it to be subjected to tax.
If you didn't need to pay tax on some of the $145B, why would you if you didn't need to? Why would you give the tax man more money if you had other means of raising funds in a cheaper manner?
Apple is still paying taxes in the U.S., but they're also being smart with their cash on hand.
If you didn't need to pay tax on some of the $145B, why would you if you didn't need to? Why would you give the tax man more money if you had other means of raising funds in a cheaper manner?
Apple is still paying taxes in the U.S., but they're also being smart with their cash on hand.
Why should they pay US tax on money earned ... in say ... Japan? or Thailand? or Brazil?