Naperville Business Lawyer Discusses Apple’s $100 Billion Share Buyback

buyback, Naperville business law attorneyJust about the only thing that remains constant in American politics is change. Change is always being made on a variety of fronts, including health care, law enforcement, social issues, and of course, taxation. At the end of 2017, President Donald Trump signed a tax-reform measure that was largely championed by Republicans. Many of the measure’s provisions will be taking effect this year, and while some of them apply to private taxpayers, others apply to businesses and corporations.

As a business law attorney, I am acutely aware of how changes to corporate tax laws can dramatically affect companies of all sizes. One of the new law’s provisions offers incentives in the form of a reduction in taxes for companies to repatriate funds being held abroad. Around the beginning of the year, tech giant Apple has been saying that it planned to bring most of the $252 billion in cash that the company held overseas. Since then, investors have been speculating what Apple would do so much cash. As it turns out, a large portion will soon be going back to those same investors.

A Huge Buyback

Earlier this week, Apple announced its plan to buy back an additional $100 billion in shares currently being held by investors. The buyback is intended to be in addition to other buybacks that have already taken place. No company in history has returned more capital to investors than the California-based Apple. In the second quarter of the 2018 fiscal year, bought back nearly $23.5 billion in shares, more than twice what it spent on buybacks in the previous quarter.

In addition to the planned buyback, Apple also increased its dividend to 73 cents per share—a 16 percent jump. The increase pushes Apple ahead of Exxon Mobil as the largest dividend payer in the world.

Mixed Reviews

Financial experts have observed that Apple’s buyback is part of a growing trend in response to the new tax law. Buybacks of shares are approaching record-highs and are good news for investors—a group that often includes employees and top-level executives. By reducing the pool of available shares, a buyback typically boosts stock prices.

Critics point out that money back in the pockets of investors can limit a company’s possible re-investment in research and development or hiring. There is also the concern that shareholders are usually on the wealthier end of the spectrum, which means buybacks increase the divide between the so-called “haves” and “have-nots.”

Apple dismissed critics’ concerns when its chief financial officer gave an interview on the matter. CFO Luca Maestri said that the company is continuing to invest in manufacturing, hiring, and development, “but we also have a very, very profitable business.” Maestri indicated that the company is “all the right investments” internally, so it makes good business sense to get extra cash off the balance sheet by returning it to shareholders.

Considering a Buyback or Buyout?

If you are thinking about a buyback of your company’s shares or you would like to buy out one or more of your shareholders, an experienced Naperville business law attorney can provide the guidance you need. We can help you draft favorable terms and legally sound contracts that protect you, your shareholders, and your company. Call 630-756-1160 for a confidential consultation at The Gierach Law Firm today.

 

Sources:

The Balance

The New York Times

MarketWatch