Why Apple bought zero shares in December…

And then, according to Statista, it retired 14.5 million Apple shares in the first three weeks of January.

Below: Buybacks by month. Click on the “Average price” column to see dollars per share. Not seeing the bar graph? Click here.

Note: Corrected data courtesy friend-of-the-blog Turley Muller.

My best guess: Tim Cook knew in December that his Jan. 2 guidance warning would send the stock into free fall. Why invite investor lawsuits and SEC scrutiny?

16 Comments

  1. George Knott said:

    Of course Tim knew in December they weren’t going to make it. If I recall he sold a boatload of shares earlier in the quarter at $211. I have been a big Aapl fan since 2009 and had 5000 shares during the last quarter. Finding out this week, that Aapl stopped their buybacks in December, even though the stock was lower makes me wonder how much they really cared about the shareholders. Instead, they sat on that information until January and burned us badly.

    After hearing this on the earnings call this past week I sold the last remaining shares of Aapl because I have lost faith in the honesty of Tim Cook. I don’t trust his word or vision. My money is now in Boeing, at least for now.

    0
    February 1, 2019
    • Dan Scropos said:

      I see this in a completely different context. Buying back shares after missing so badly could have possibly opened the company up to an investigation. That is, did Apple deliberately guide $89-$93 billion as a means to lowering the share price to buy cheaper shares?

      Ultimately, I think they suspended the buyback until the guided lower for ethical reasons. They didn’t want to repurchase shares knowing shares were going lower. That would have been inviting a class action lawsuit. As a shareholder, I think they handled it well. But I respect your opinion, too.

      2
      February 2, 2019
  2. Gary Morton said:

    PED, From where did you find out that Apple bought 14.5M in Jan? If true, no problem with SEC due to the Jan 2 preannouncement. They may have had potential issues with purchases in 2H of Nov and Dec 18, if they knew the quarter was tanking and the company would not likely hit in the guidance range—Non-public Material Information.” However, it looked like they made no purchases in that time frame, at least given the average share price of 215 for the Q1 buybacks.. January was clear sailing for the repurchases. Public information about the Q1 miss. As a note, Cook is on a plan and has very little if any ability to time his sales.

    1
    February 1, 2019
  3. Michael Thompson said:

    Apple should have spent more than $50 billion in stock buybacks for the quarter. If they spent $75 billion during the quarter, they could have retired 10% of all shares in 90 days.

    Something doesn’t smell right about the net cash INCREASING during a quarter that saw a precipitous and calamitous decline.

    When the cash neutral strategy was introduced nearly one year ago, Tim and Luca stated that the buyback would be employed strategically. A quarterly decline from 233 to 142 might have been a really wise and strategic use of OUR money.

    How many years is it going to take to get us to cash neutral? Does it make sense to spend $20+ billion per quarter at prices over 220 and then cease the buyback when the stock is getting pummeled and declines 40% in 90 days.

    Indefensible and a cause for a class action shareholder lawsuit.

    0
    February 1, 2019
  4. Matt Tanase said:

    Those numbers aren’t right according to the recently filed 10q. They bought 31.34m shares in Oct and 6.68m shares in early Nov. Nothing for the rest of the year. If I’m doing my math right it looks like they might have bought 20m in the first 3 weeks of Jan?

    1
    February 1, 2019
  5. Turley Muller said:

    Yeah those numbers are a little off, but same principle. Bought 31M shares at $220 in OCT and 6.7M at $202 in NOV. Nothing in DEC when AAPL got put out on the bargain rack.

    1
    February 1, 2019
  6. Gregg Thurman said:

    SEC rules regarding share buybacks are quite specific. There are two kinds of buybacks: A. contractual purchases scheduled for the future at a predetermined rate and B. open market purchases

    The rules regarding open market purchases are that the Company can only buy on stock UP ticks. It cannot buy on DOWN ticks. From NOV earnings through the remainder of the quarter UP tick s were infrequent if not nonexistent. Secondarily, Apple was in possession of material knowledge that the general public was not (decline of greater China sales). It could be argued that Apple used that insider knowledge to take advantage of smaller (presumably less knowledgeable) investors had Apple bought shares during the downturn.

    The whole point of the SEC rules regarding share buybacks is to protect the little guy/gal from firms acting on insider knowledge.

    Even after Apple warned I don’t believe it resumed share buybacks until after its scheduled Earnings report, conference call and March quarter guidance.

    That brings us to AAPL’s rally since Apple’s Earnings report. I think it is being driven in large part (at least initially) by Apple’s resumption of share purchases.

    But then I say so what if Apple didn’t buy at $142 but waited until AAPL regained $160. That’s still $77 lower than AAPL was just a few months ago when Apple was paying an average >$210/share.

    As I have stated before, Apple isn’t in the BUSINESS of buying back shares. Way to much focus is being given to an act that is fully dependent on Apple’s BUSINESS performance. I’d like to see the same degree of focus given to Apple’s business.

    4
    February 2, 2019
    • Turley Muller said:

      Gregg, I think you have it reversed, Uptick rule is for short sales. Firms can only repurchase their own shares on downticks. It”s shorts sellers who can only sell on upticks.

      The rule is firms can not repurchase shares at a price that exceeds either 1- the quoted bid or 2- the last trade price (whichever is higher) . It is to prevent manipulation by artificially inflating their stock price, which insiders have a huge incentive to do so considering how much compensation is in the form of company stock. In addition, firms are prohibited from buying in the last 30 minutes to prevent them from running their stock up on the close.
      Just as you said- management had material non-public information. That is the ultimate disqualifier. End of story.

      I think you are right about repurchasing affecting the recent rise in stock price, at least providing a base of support. Something that at least buffers the indiscriminate selling of ETFs that has a disproportionate effect on AAPL shares.

      1
      February 2, 2019
  7. Gary Morton said:

    A lot of people argue that buybacks are better than dividends when it comes to increasing shareholder value. However, this recent experience with Apple’s buyback in FYQ1 demonstrates why that is not necessarily so. The company just has too many restrictions for its repurchases. If Apple would have paid out $8.2B more in dividends last quarter, then shareholders could have purchased their own additional shares with their extra dividends at the low $142 per share. This is a share price that Apple was apparently unable to capitalize upon, but individual shareholders could have. Even after tax, these shareholders would be better off than depending on the company’s repurchase program.

    0
    February 2, 2019
  8. Kirk Burgess said:

    These numbers are “whack” (technical term) does not line up at all with the 10-Q

    0
    February 2, 2019
  9. Jonny Tilney said:

    Quit the conspiracy theories, and judge buybacks after two or three years, not weeks or months – we know Tim plays the long game (as did Jobs).

    6
    February 2, 2019
    • Dan Scropos said:

      Best post in this thread.

      1
      February 2, 2019
  10. Matt Tanase said:

    There’s no conspiracy theory here. It’s a shame to see Apple management do what every other bone headed public company has done, buy high and freeze up when it drops. Hopefully they will get a pass if we see them buying heavily in January. With regards to not being able to buy in Dec, why didn’t Luca say this when an analyst pointed out the drop in repurchases on the conference call?

    0
    February 3, 2019
  11. From Dan Gallagher in Monday’s Wall Street Journal: “Perhaps Apple didn’t feel safe catching its own falling knife.”

    Huh?

    0
    February 4, 2019
  12. Michael Gabrys said:

    Company stock buyback rule per Investopedia, assuming it’s correct. There are 4 conditions to meet the safe harbor requirement. The stand out for me is that the restriction for the last 30 minutes of trade appears to be for smaller companies.

    For example, Monday’s (2/4) last 5 minutes of trading had 4.3MM shares trade. That was an 11X increase from the prior 5 min. The open the following day gapped up $2. I now wonder if that was Apple.

    https://www.investopedia.com/terms/r/rule10b18.asp

    0
    February 6, 2019

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