Apple reportedly silently bought back $23.5 billion worth of its own shares off the open market in March, creating hysteria in the whole business market. This has driven every analyst and financial news site into a panic. They had been pondering over the fact that Apple just might ‘kill’ the most advanced and commercially successful smartphone it has ever produced. Apple began buying its share back in 2012. Since 2012, Apple has spent a total of $199.6 billion in share buybacks.
Over the past two and a half years, Apple has spent between $6 and $11 billion to buy back its stock. In recent times, however, Apple has spent more than its past pace to buy back the shares, pulling them off the market. The U.S tax laws have levied a substantial penalty tax on the repatriation of money earned overseas. So the giant’s plan of buying back all of Apple shares has fallen back a little, not hitting its desired mark. But now, this tax rule has changed. So, Apple will be able to use its foreign earnings to invest domestically while paying a reasonable tax rate, putting money on work again, which had been sitting idly so far.
Buying back its shares can be seen as investing in the company itself because it enables Apple to recruit talent by offering valuable stock options. In 2012, Apple bought its shares and paid market prices for its stock, then destroyed those shares. This entire process makes the shares that remain within the company more valuable. Apple began borrowing money at very low-interest rates to fund its buybacks, which helped them return the value paid to shareholders.
Apple’s acquisition target is actually profitable. However, Apple’s #23.5 billion stock repurchase is bigger than anything the stock market has ever seen. It is nearly 8 times the size of its largest-ever acquisition of Beats and more than twice the size of Google’s acquisition of Motorola Mobility. However, Microsoft’s acquisition of LinkedIn and the IPO valuation of Spotify comes close to it.
