Apple Inc. spends 14 billion dollars on buybacks after shares drop

Apple Inc. announced that more than half of the 100 billion dollars it pledged to return to its shareholders by the end of 2015 has already been spent. Currently, the company is preparing for a battle with Carl Icahn, who is an activist investor, over the companys allocation policy that is planned later in February.

Mr. Carl Icahn said that he had increased his Apple holdings to 3.6 billion dollars and purchased more shares of the company. He revealed on Twitter that he had invested another 500 million dollars in the company.

“My buying seems to be going neck-and-neck with Apple’s buyback programme, but hope they win that race,” said Mr. Icahn, cited by Financial Times. He also sent an open letter to the companys Chief Executive Mr. Cook, saying that Apple Inc. is “perhaps the most overcapitalised company in corporate history”.

The companys shares decreased 8% in a single day, its second largest one-day drop. This happened after Apple reported that its iPhone sales failed to reach Wall Streets forecasts last week.

The companys Chief Executive Officer – Tim Cook revealed in an interview for the Wall Street Journal that he made the “opportunistic” decision to buy back 14 billion dollars of its own shares over two weeks. Mr. Cook explained that the decision was taken after he was “surprised” by the response of Apples investors. The company confirmed the figures he revealed to the Financial Times, but refused to make any further comments.

The buybacks in question come as part of the companys already existing capital allocation plan. The latter was increased by 55 billion dollars to 100 billion dollars in April 2013. The company was said by its CEO to reconsider those plans in March or April 2014.

Almost 8 billion dollars were paid out by Apple in dividends and buybacks during each of the companys past two quarters. As reported by the Financial Times, 18.8 billion dollars were paid out in the quarter that ended in June 2013. Another 2.9 billion dollars in dividends are expected to be allocated by next week, which will take Apples total payout to 60.5 billion dollars.

Apple Inc.s shares fell by 0.02% on Thursday to settle at $512.51, marking a one-year change of +12.06%. According to CNN Money, the 45 analysts offering 12-month price forecasts for Apple Inc. have a median target of $600.00, with a high estimate of $777.00 and a low estimate of $360.00. The median estimate represents a +17.07% increase from the last close.