In an open letter to Apple shareholders on Monday, investor Carl Icahn, he of the activist bent, says he is dropping his efforts to push Apple to purchase more of its stock back from shareholders. He says the recent stock purchases by the company are “so close” to equaling his original targets.
Icahn announced the repeal of his efforts in an open letter to shareholders. The backing off comes after Apple bought some $14 billion worth of its own shares in the last few weeks, marking the largest repurchase on record for such a short period.
Shares in Apple dropped 8% immediately following the release of the company’s quarterly earnings results. The fall in price prompted Apple to take advantage of the opportunity.
Apple’s $14 billion stock repurchase sent shares of the company surging, and Icahn himself even complimented the company on its move, offering advice via Twitter, “Keep buying Tim!”
Icahn was also persuaded to drop his efforts when proxy advisory firm Institutional Shareholder Services issued a note on Sunday advising AAPL shareholders to vote against his proposal. Icahn proposal was for a $50 billion repurchase of the company’s stock. Apple has spent $40 billion on repurchasing bits of itself in the last year.
Icahn’s letter can be perused in its entirety below:
CARL C. ICAHN
767 Fifth Avenue, 47th Floor
New York, New York 10153
February 10, 2014
Dear Fellow Apple Shareholders,
While we are disappointed that last night ISS recommended against our proposal, we do not altogether disagree with their assessment and recommendation in light of recent actions taken by the company to aggressively repurchase shares in the market.
In their recommendation, ISS points out, and we agree, that “on the spectrum of options for allocating capital, the board appears to have been sluggish only in returning excess cash to shareholders,” and even though the company has in place “one of the largest buybacks in history” we agree with ISS that this effort seems “like bailing with a leaky bucket” when “given the scale of the company’s cash reserves.”
That being said, we also agree with ISS’s observation, taking into account that the company recently repurchased in “two weeks alone” $14 billion worth in shares, that “for fiscal 2014, it appears on track to repurchase at least $32 billion in shares.” Our proposal, as ISS points out, “thus effectively only asks the board to spend another $18 billion on repurchases in the current year.”
As Tim Cook describes them, these recent actions taken by the company to repurchase shares have been both “opportunistic” and “aggressive” and we are supportive. In light of these actions, and ISS’s recommendation, we see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested repurchase target.
Furthermore, in light of Tim Cook’s confirmed plan to launch new products in new categories this year (in addition to an exciting product roadmap with respect to new products in existing categories), we are extremely excited about Apple’s future. Additionally, we are pleased that Tim and the board have exhibited the “opportunistic” and “aggressive” approach to share repurchases that we hoped to instill with our proposal. It is our expectation that Tim and the board continue to exhibit this behavior as fiduciaries to the shareholders since they clearly seem to agree that our company continues to be extremely undervalued, and we all share a common optimism with respect to the company’s bright long term future.
Carl C. Icahn
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