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.
2nd Thing Apple Inc. Can Buy in Cash: The Country of Liechtenstein
A few years ago, the small but scenic country of Liechtenstein opened its borders in a really strange way. For $70,000, a private client could actually rent out the entire country. Liechtenstein is nestled between Austria and Switzerland, putting it squarely in the middle of the Swiss Alps. (Source: “Liechtenstein for hire at $70,000 a night,” The Guardian, April 15, 2011.)
Apple could rent out the country for the next eight millennia. Using its $205 billion in cash reserves, Apple would have enough money to spend roughly 8,059 years in the picturesque little country. Of course, I’m not sure the people of Lichtenstein would be too happy about it.
3rd Thing Apple Inc. Can Buy in Cash: 1.37 Million Jetpacks
A common refrain among baby boomers is they never got the jetpacks that science fiction movies and TV shows promised them. Well, that’s starting to change. The first generation of jetpacks are almost commercially viable, but they come with a hefty price tag.
The “Martin Jetpack” is one example, with tentative pricing starting at $150,000 per unit. Apple could afford 1.37 million of those jetpacks, assuming that many units could be built, of course. I’m not sure that a fleet of jetpacks would do anything for Apple stock, but hey, it’s a cool idea. (Source: “To infinity and beyond! Has the jetpack’s time come?” CNBC, June 16, 2015.)
4th Thing Apple Inc Can Buy in Cash: 15 Aircraft Carriers
The USS Gerald Ford is expected to be the most expensive aircraft carrier the U.S. Navy has ever ordered. By the time the ship is delivered in 2016, its total cost to taxpayers should be around $13.0 billion. While its is grossly over budget and past due, the new aircraft carrier is a behemoth and is just one of 10 aircraft carriers that make up the U.S. Navy’s fleet. (Source: “This is America’s new $13 billion warship,” Business Insider, June 22, 2015.)
Apple could buy 15 of them. Just to be clear, if Apple deployed its entire cash horde, it could have more aircraft carriers than the U.S. Navy. I don’t know if that’s scary or amazing—or maybe it’s both.
5th Thing Apple Inc. Can Buy in Cash: 3,164 Private Jets
Sticking with the transportation theme, let’s look at the luxury end of the spectrum. Imagine that Apple executives abandoned all reason and sought to amass the largest fleet of private jets. It would be an absurd flight of fancy, but Apple could buy up to 3,164 “Gulfstream G650s.”
These are no ordinary private jets. Gulfstream G650s are the aircraft of choice for the uber-wealthy, with Oprah Winfrey, Warren Buffett, and Ralph Lauren all shelling out more that $65.0 million to own one. (Source: “Tour The Amazing $64.5 Million Gulfstream G650,” Business Insider, October 24, 2012.)
The waiting list is long and no one is allowed to jump the line, so Apple probably won’t buy up the lot (also there aren’t enough planes for that kind of demand). Nonetheless, Apple has enough money for 3,164. That’s just crazy.
6th Thing Apple Inc. Can Buy in Cash: Trinidad & Tobago
Last year, there was a hoax article floating around the Internet that Google, now known as Alphabet Inc., wanted to buy the country of Trinidad & Tobago. We now know that to be a ridiculous falsehood, but it was amusing for a while.
The story was that Google saw untapped potential in Trinidad. It (apparently) wanted to mobilize the latent resource in the country and raise the country’s living standards, while also reaping a reward. Although that story was fake, Apple could afford to buy Trinidad & Tobago eight times over.
The country’s GDP was just $24.4 billion at the end of 2013, so if Trinidadians are looking for a buyer, they know who to call.
7th Thing Apple Inc. Can Buy in Cash: Nothing
Instead of buying aircraft carriers or jetpacks, Apple could just send a check to each American. Everyone, from the eldest senior down to the youngest baby, would get $638.00 if Apple split its cash pile evenly among all Americans.
While that’s probably not the most imaginative use of Apple’s cash pile, I’m sure many Americans would appreciate the help. Of course, I should reiterate that none of these theories are probable, or even likely for that matter.
They were just a fun way of putting Apple’s massive cash horde into perspective. What we really want is for Apple to bring that cash back to the U.S. and start buying back AAPL stock. That would be the kind of investment Apple shareholders would appreciated.