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  •  Icahn Pushes Apple On Buyback (13+ / 0-)

    Billionaire investor Carl Icahn is probably best known for being a "corporate raiders" of the 1980s. His' hostile takeover of Trans World Airlines (TWA) resulted in it being stripped, dismantled, and the pieces sold off for profit.

    He's also notorious for being an "activist investor." Icahn targets a company he thinks is poorly run and trading below value. He buys up a significant chunk of shares, and then starts making demands & basically being a nudge to management. Since he has a rep of raising the stock price by any means necessary (even if it's arguably detrimental to the company in the long-term), his demands usually have some sway with other shareholders. After the stock lifts as much as Icahn thinks he can get, he dumps it and moves on.

    So when Icahn started buying up shares of Apple, business reporters wondered what was afoot?

    From the Wall Street Journal: Activist Investor Puts in Over $1.5 Billion, Presses for More Cash

    Investor Carl Icahn has grabbed a stake valued at over $1.5 billion in Apple Inc., believing that more cash should be falling from the tech giant's branches.

    Specifically, Mr. Icahn is pressing the company to buy back shares now.

    While Apple earlier this year announced a large buyback, Mr. Icahn said in an interview Tuesday that he wants to see it happen right away, near the current share price, which he considers cheap.

    "This is a no-brainer to go buy stock in a company that can go borrow" at a low rate, Mr. Icahn said in an interview. "Buy the company here and even without earnings growth, we think it ought to be worth $625," he said, referring to the stock price, which closed Tuesday at $489.57, having risen 5% on the news of Mr. Icahn's investment. Mr. Icahn's thesis rests on Apple borrowing at about a 3% interest rate and buying back shares right now, likely at around $525 a piece. A stock buyback can increase earnings per share by reducing the number of shares outstanding.

    Using Twitter on Tuesday to publicize his move, Mr. Icahn—who is known for buying large positions in various companies and then agitating for change—said he had a "nice" conversation with Tim Cook, Apple's chief executive, and discussed his opinion that "a larger share buyback should be done now." He added that he plans to speak with Mr. Cook again "shortly."

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