Apple may not be snapping up big companies all over the place like Yahoo!, but it is buying lots of shares in one major corporation — itself. Last quarter, the Cupertino company spent $16 billion on 36 million of its own shares, which cost, on average, just over $444 apiece.
That’s according to calculations made by Fortune’s Philip Elmer-DeWitt, who reports that Apple spent $4 billion of its cash reserves, and another $12 billion through its “so-called accelerated share repurchase program.”
“Most of those shares — about 22 million — were retired in fiscal Q3, leaving Apple with 908 million shares outstanding, according to its latest 10-Q,” writes Elmer-DeWitt. ”The rest will be retired in Q4.”
Let’s just take a minute to put this into perspective. For $16 billion, Apple could have bought Nokia, or BlackBerry three times over. So why is it purchasing shares in itself?
Well, by repurchasing its shares, and then absorbing them, Apple is reducing the number of shares available on the market. In turn, those who have invested in the company end up with a larger stake because there are fewer claims on its earnings.
What’s more, share repurchasing like this shows that Apple believes in itself, and that it’s confident the price of its shares will increase again. It has taken a battering in recent months as its stock price has continued to nosedive, dropping below $400 for the first time since December 2011 back in April.
But Apple clearly feels this is too low, and that the market has reduced its share price too much.
“One way to think of it,” said Asymco‘s Horace Dediu, “is this is Apple’s greatest acquisition ever.”
- Source Fortune