Not so long ago, Cybart says, everybody on Above Avalon wanted to know why Apple bought its own shares. Nobody asks anymore.
From “Apple Won the Share Buyback Debate” posted (free) Wednesday:
Since beginning to repurchase shares in 2013, Apple has spent $380 billion to buy back 10.6 billion shares at an average price of $35.80 per share. It’s tempting to think that Apple’s share buyback has been a success because Apple shares are trading 265% higher than the average price management paid to repurchase shares. However, one cannot judge buyback’s effectiveness or success by merely looking at the current stock price. Apple retires repurchased shares so there aren’t unrealized gains on the balance sheet from previously repurchased shares.
Share repurchases aren’t meant to boost stock prices even though some management teams may strive for such an outcome. Instead, share buyback is a tool for removing excess cash from balance sheets. In the process, a wealth transfer event is possible as ownership is shifted from shareholders willing to sell shares back to the company to those shareholders not selling shares.
Cybart’s chart shows Apple stepping on the gas after the 2017 repatriation tax cut.
My take: Joe Bland, this one’s for you.