While Apple announced a large buyback ealier this year, the activist investor revealed to reporters 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, speaking of the stock price, which closed Tuesday at $489.57, having risen 5% in the wake of the news of Mr. Icahn’s investment.
“We currently have a large position in Apple. We believe the company to be extremely undervalued,”Icahn wrote on his Twitter page.
He went on, adding that he had a “a nice conversation with [Apple CEO] Tim Cook today,” revealing that they “discussed my opinion that a larger buyback should be done now.” Icahn added that “We plan to speak again shortly.”
And though the ivestor hadn’t revealed the size of the stake but a person familiar with the matter told reporters that Mr. Icahn’s stake is worth more than $1.5 billion.
Getting influence over the iPhone maker won’t be easy and will take significant amounts of money, given a stock market value that currently stands at close to $450 billion. At that capitalization, Mr. Icahn’s stake would be less than 1%.
Steve Dowling, an Apple spokesman, said the Cupertino based tech company does appreciate the displayed interest and investment of all its shareholders. “Tim had a very positive conversation with Mr. Icahn today,” he said, without elaborating.
The investor usually uses his Twitter account to announce his deals and investments.
He has been previously involved in a battle over the future of Dell Inc., whose chief executive and founder is trying to make the company a private one. Mr. Icahn holds a stake of nearly 9% in the computer maker.
Mr. Icahn revealed Tuesday that he decided investing in the iPhone maker on the advice of his son Brett Icahn and investment partner David Schechter, who have been looking at the technology sector for Icahn Enterprises LP.
By the way, the Cupertino company bought about more than $16 billion worth of stock in the June quarter, thus exceeding the numers predicted by analysts.
“It’s a heavyweight investor who can maybe accelerate the (buyback) program,” said Morningstar analyst Brian Collelo. “It helps the positive momentum that Apple has seen.”
There also speculations that Apple has no need to expand or speed up its buyback program, Reuters writes.
Much of the company’s $147 billion in cash is being kept not in the U.S., and that cash cannot be easily accessed because of taxes. As an alternative, Apple raised debt to bankroll its buyback program.
“It was already greatly increased and there was a debt offering to facilitate that,” Hudson Square Research analyst Daniel Ernst said. “I can’t say that I agree that the pace of the buyback is tepid.”
Investors’ biggest concern about the company is whether Apple has lost its innovative edge. “Product innovation and profitability” are now top priorities, Ernst said.