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Thursday, 22 November 2018 08:46

Why Apple will delist and go private before 2020 Featured


If one has an empathetic bone in his or her body then you have to feel for Apple chief executive Tim Cook. The poor guy has to report his company’s financial performance to regulators, investors and the market every 90 days. This will not continue for much longer because it is inevitable that Apple will go private.

Currently, Cook has to report results, he also has to justify the performance of the past 90 days and give guidance for the coming period and year ahead. The company may be making money hand over fist — and it is — but if the numbers do not show growth it is all for naught as far as shareholders are concerned.

In the case of Apple, not only is the compliance that accompanies life as a public company a strain on management, it also hampers innovation and development. If a company is continually constrained by demands for short-term growth, then long-term innovative projects are inevitably going to be shoved aside.

Additionally, Apple is a company that has a culture of secrecy and it must be anathema to be forced to publicly open its books every 90 days.

According to numerous reports, Apple has about US$400 billion cash and, based on its latest earnings, it can stash another US$50-60 billion in the bank each year. The company’s market cap today is about US$845 billion. The mathematics is not too difficult.

Of course, this is not the first time the possibility that Apple will take itself private has been mooted. In the current era, it was suggested as far back as 2013.

However, over the past five years Apple has undergone phenomenal growth, preventing any talk of going private. Over that period, up until its peak in September, the company’s share price almost tripled. For investors, that was an annual return of about 23%. Not too shabby, but unsustainable over the long term.

The current share price pull back of 24% over the past two months is the worst Apple has experienced in the period since 2013. This represents a golden opportunity for the company to buy back more of its stock cheaply, a practice it has been engaging in regularly like other large techs.

For a company with the assets and cash flow that Apple has, funding its own delisting is more than feasible. It can afford to issue bonds paying very attractive above market rates to investors.

Financially, Apple is rock solid, arguably more so than banks that have to be bailed out every time there is a serious downturn. In an era of low growth, investing in Apple bonds makes far more sense than putting money into the company’s stock.

If one was to be a trifle cynical, one might even think that Cook and his cohorts at the top of the Apple corporate tree are happy that the growth merry-go-round has stalled.

Way back in 2012, when Apple “only” had US$100 billion in the bank, Cook famously told investors that the company had more money than it needed to operate and was looking for ways to utilise its cash stash.

Six years and an additional US$300 billion in the bank later, it is clear that either Cook still doesn’t know what to do with the Apple’s growing cash pile or he is saving up for something big – like taking the company private. My bet is on the latter.


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Stan Beer


Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.



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