Things to Buy With AAPL Cash Reserves
Although Apple Inc. (NASDAQ:AAPL) has become the most valuable company in the world, Apple stock hasn’t fulfilled its potential. Hundreds of billions of dollars in unused cash are sitting in the Cupertino-based tech giant’s overseas accounts, doing nothing to propel AAPL stock to new heights.
What a shame. You’d think that $205.67 billion (that’s right, that’s billion with a “B”) would jolt some firms into acquisition frenzy or perhaps Apple would start buying back more AAPL stock, but it hasn’t happened for the company yet. By squeezing the supply of Apple shares through a buyback, shareholders could see the price of AAPL stock appreciate rather dramatically. Unfortunately, neither situation has come to fruition.
Instead, Apple appears to prefer to keep its money overseas, far from the prying hands of Uncle Sam. Bringing cash back to the U.S. would be disastrous for Apple’s tax bill, so investors in AAPL stock are content to let the company horde its cash elsewhere.
That is, investors were content until Carl Icahn came knocking at Apple’s door.
Carl Icahn Moves to Unlock Apple Stock Potential
Icahn is a notorious activist investor. He slowly amasses large portions of stock, this time in Apple stock, so that he can dictate terms to the company’s management.
Using his large contribution to AAPL stock, Icahn is trying to leverage the board into ramping up a repurchase program. At the same time, to make the tradeoff easy for them, Icahn launched a Super PAC to lobby Congress for a tax holiday. The tax holiday would allow Apple a one-time opportunity to bring back cash at a greatly reduced tax rate.
Based on Icahn’s share of AAPL stock, my calculations show that he owns $900 million of those overseas cash reserves. If Apple repatriated the money under current law, it would owe the U.S. government $315 million on Icahn’s share alone.
However, a tax holiday with an eight-percent rate would save Apple $243 million, meaning it could pay out more to Carl Icahn through his ample holdings of AAPL stock.
That’s the situation as it is right now. Carl Icahn isn’t a man to be reckoned with, so it’s likely that he’ll get his way. However, till that time, we thought it would be fun to think about what Apple could buy with $205 billion in cash reserves.
Although the purchases wouldn’t boost AAPL stock, they give us a sense of just how much money Apple is sitting on.
1st Thing Apple Inc. Can Buy in Cash: Hoverboards for Everyone!
With its $205 billion in cash, Apple could afford to buy every single American their own hoverboard. No, not like the ones in Back to the Future II. These hoverboards don’t actually float in the air; instead, they are two-wheeled, self-balancing boards that let the user zip around without a handle or control system. Think of a Segway without handles. (Source: “Everything you’ve ever wanted to know about the hoverboard craze,” Quartz, November 11, 2015.)
The motorized boards are hot in demand right now, with prices averaging from $400.00 to $600.00 each. That might seem like a good chunk of change, but it’s not a problem for Apple. The smartphone maker could afford to buy 322 million, or one for every American, and it would still have change left over.