Since August 2013, the activist shareholder Carl Icahn – the second richest person in America and a man who made his fortune on Wall Street – has been pushing Apple to give some of its huge piles of dollars back to shareholders through a share repurchase program of up to around $150 billion.
It all started when Icahn first acquired a large position in the world’s biggest technology company. At that time, the investor announced his belief that the company was “extremely undervalued,” and did so in a very unusual and controversial way, through a tweet on his Twitter account.
In fact, his move on Apple was no different than some of Icahn’s past transactions, buying interests in Netflix and Dell, in which the billionaire has roughly applied the same modus operandi – buying a significant stake at a public company and proposing changes aimed at giving him an upside.
Icahn’s history with Apple took a new turn later in October, when the Wall Street investor launched a website called Shareholders’ Square Table, a platform for shareholders to “unite and fight for [their] rights as shareholders and steer towards the goal of real corporate democracy.” In order to call attention to its newly launched website, Icahn announced and disclosed a letter to Apple’s CEO, Mr. Tim Cook, with details about his intentions for the company.
In the October open letter to Apple, Icahn proposed that the company should implement a $150 billion buyback program of its shares, with money to be raised through a mix of debt funding and its own cash. Icahn acknowledged that he was “supportive of [Tim Cook], the existing management team, the culture [of Apple]”, but affirmed that the company needed a buyback program “much bigger and immediate” than the one originally proposed – i.e., $60 billion in three years. In Icahn’s words, “a company’s board has a responsibility to recognize opportunities to increase shareholder value, which includes allocating capital to execute large and well-timed buybacks.”
In one of Icahn’s latest moves, the investor announced that he had filed a “precatory proposal” in order to compel shareholders to cast a non-binding vote during Apple’s annual meeting on whether or not the company should implement the bigger buyback program that Icahn has proposed. The proposal means that the shareholders would vote on the subject, although the vote would not be binding on Apple’s management.
So far, Apple has replied to Icahn’s statements in a very diplomatic tone. A company’s spokesman has repeatedly said that the company is reviewing its current buyback program and that any potential changes will eventually be announced at the beginning of 2014.
And if it wasn’t enough, another big player has entered the fray. Anna Simpson, the head of the corporate governance department of CalPERS – the California Public Employees’ Retirement System, one of the largest U.S. public pension funds – has publicly criticized Icahn’s position over Apple, stating that the investor came too late for the discussions over the buyback program and that Apple’s management is doing a good job with the currently placed program.
The truth is that Apple will likely become the stage of an interesting dispute between two of the biggest shareholder activists in America.