Right on cue, everyone’s favorite activist investor, Carl Icahn, started pushing for Apple to buy back a boatload of stock while shares are reasonably cheap and while he thinks he has power to motivate disgruntled AAPL shareholders into siding with him.
Today, though, he was forced to give up.
Icahn’s Brief Battle for Apple Buybacks
Last week, Icahn pushed the pedal harder for continued aggressive buybacks after AAPL announced it had executed $14 billion in share repurchases.
After comparing Apple operating profits and valuations to rival Google (GOOG), Icahn wrote “Keep buying Tim! You still have $145 billion cash” on Twitter (TWTR) last week. (Tim, is of course, Apple CEO Tim Cook.)
— Carl Icahn (@Carl_C_Icahn) February 7, 2014
However, over the weekend, Institutional Shareholder Services said Apple should tap the brakes on any further buying.
In a Feb. 9 report, the corporate governance and financial services firm warned that, “While the board has failed to articulate a strategy for addressing its long-term capital needs, it has returned the bulk of its U.S.-generated cash to shareholders.”
ISS also wrote that, “The board’s latitude should not be constricted by a shareholder resolution that would micromanage the company’s capital allocation.”
Icahn’s response? For now, the investors apparently is sated. From a letter out this morning:
“As Tim Cook describes them, these recent actions taken by the company to repurchase shares have been both “opportunistic” and “aggressive” and we are supportive. In light of these actions, and ISS’s recommendation, we see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested repurchase target.”
For the record, ISS is a subsidiary of MSCI (MSCI), a popular market indexing firm. Neither MSCI or ISS is listed as a major holder of Apple stock.
Of course, neither is Mr. Icahn in the greater scheme of things. His $3.6 billion stake in AAPL stock is only about 0.8% and doesn’t put him in the top 10.
So the million-dollar question is, what do you think as an Apple stock holder?
For the record, Tim Cook and AAPL execs previously recommended investors vote against Icahn’s stock buyback proposals.
But should the issue arise again, regardless of what Icahn, Cook or anyone else says, the decision lies in the hands of the stockholders.
Stock buybacks on the whole are short-term fixes and financial engineering, and they don’t always result in increased share price. So many investors might instead be eager to see AAPL spend its cash on dividends with a greater hope of payback.
Of course, others might be tired of watching the gyrations and simply want to get paid.
In the end, the choice to spend a company’s cash on buybacks doesn’t lie with a single shareholder — even if that shareholder is a respected investor like Carl Icahn.
Ultimately, AAPL shareholders get to decide.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.