Billionaire investor Carl Icahn sent a letter to Apple (AAPL) CEO Tim Cook encouraging the company to accelerate its share repurchase program through a tender offer, putting the $133 billion in cash to use.
Icahn said he believes the tech giant is undervalued in the market, and a tender offer would have a positive impact on per-share profits for shareholders.
“To preemptively diffuse any cynical criticism that you may encounter with respect to our request, which might claim we are requesting a tender offer with the intention of tendering our own shares, we hereby commit not to tender any of our shares if the company consummates any form of a tender offer at any price," the investing titan said in his note.
Traditional share buyback programs allow the company to repurchase its shares on the open market. In this case, Icahn is urging the firm to launch a tender offer, which would mean Apple would agree to buyback a certain number of shares at a certain price. In his letter, Icahn didn’t elaborate on a suggested buyback price.
Icahn is one of Apple’s biggest stakeholders, owning about 53 million shares in the company.
In the letter, Icahn made clear the intent was not to criticize Apple, but to encourage the company to again “make an investment in itself.” The billionaire investor has in the past encouraged Apple, and others, to accelerate its share repurchases and raise its dividend. Back in April, after Icahn sent a similar letter to the company, Apple upped its buyback to $90 billion from $60 billion in 2013.
Continue Reading Below
“We thank you for being receptive to us and other large shareholders, all of whom are investment professionals offering advice concerning an investment decision, as the decision to repurchase shares is in effect the company making an investment in itself. And given the size of our investment and our proven track record with respect to public equity investing, we hope you will be receptive once again,” Icahn wrote.
Icahn went on to explain, according to his analysis, Apple should trade around $203 per share, instead of the $100 range it’s currently trading in. He said the disparity equates to an undervaluation of the company.
In response to Ichan's letter, Apple said it appreciates feedback from shareholders, but won't make a decision based solely on one stakeholder's view.
"Since 2013 we’ve been aggressively executing the largest capital return program in corporate history. As we’ve said before, we will review the program annually and take into account the input from all of our shareholders," a spokesperson told FOX Business.
Shares of the tech giant were 1% higher in recent trade following the issuance of the letter.