No, Apple didn’t ‘lose $9 billion’ by repurchasing shares

“Apple has bought back a truly staggering amount of stock so far in 2018 following the passage of tax reform a year ago,” Evan Niu writes for The Motley Fool. “Through the first three quarters of 2018, the company had repurchased $62.9 billion in stock, and will likely end up buying back over $80 billion in 2018 after everything is said and done.”
“Markets have been in complete disarray over the past three months, with volatility skyrocketing and stocks getting relentlessly hammered nearly every day. Apple shares have lost about a third of their value after peaking in early October, and the stock is now down about 7% year to date,” Niu writes. “That’s led to The Wall Street Journal (subscription required) arguing that Apple has now lost $9 billion by repurchasing all those shares. But that’s not exactly true.”
“Here’s the thing: Those shares don’t exist anymore. When Apple repurchases its stock, it retires those shares, reducing its total number of shares outstanding,” Niu writes. “It’s not as if Apple was buying back its stock with the intention of reselling (or reissuing through a secondary offering) those shares at a future date for a gain. The only real way you tangibly destroy shareholder value is if you repurchase shares and then resell them at a loss shortly thereafter.”
Read more in the full article here.
MacDailyNews Take: Shouldn’t The Wall Street Journal, of all things, understand investing, share repurchases, P/E ratios, earnings accretion, dividend payout reductions, and the like?
And, on top of it, they have the gall to (try to) charge subscriptions for pure crap like that. Amazing.
Nobody “lost” anything on their Apple investments this year unless they sold their shares at a loss.
It doesn’t matter to Apple what the price was versus is, per se, it only really matters to Apple (and to shareholders) that those shares were retired (or converted into RSUs for employees; another form of self-investment). Apple’s buybacks this year have reduced AAPL shares outstanding by some 6.7% – quite a significant amount!
In a year or two, let’s check what the value of those shares would be. We highly doubt it will be -$9 billion (or negative at all). And then The Wall Street Journal can write another silly story about what a great investment Apple made in calendar 2018 quarters one, two, and three by investing in itself. — MacDailyNews, December 28, 2018
SEE ALSO:
Apple ‘lost’ $9 billion this year by investing in itself or something – December 28, 2018