No. of Recommendations: 9
Let us pretend that Apple kept all those bought back shares, what would they be worth today?
Interesting question!
Random thoughts:
First, be careful...such discussions are logic minefields. The remaining public shares are only worth as much as they are today because each share implicitly already owns its portion of those treasury shares. You have to be careful not to count that value twice at any step of your hypothetical. Do the treasury shares you're thinking of selling currently get some of their value from owning themselves?
A much simpler way to phrase it:
The public share count has dropped by 11.18 billion shares since 2012. If they issued 11.18 billion shares in new stock today, what aggregate price could they get for it? This share issuance in return for cash would precisely undo the [net] buybacks they've done. So the aggregate price you'd get is today's market value of all the past buybacks.
Even if one assumes there are no liquidity limits, could they get $3.1 trillion ($270 a share) for that secondary? Hard to answer. They'd have to have a story of what they'd do with the money, and we don't know what that would be. (buy Microsoft? the ultimate revenge...)
Perhaps a better measure is, was it good capital allocation on average? What if they had done something else with that money? One suggestion a very long time ago (when Apple was apparently very richly valued) was to buy Berkshire shares (which weren't at the time). Or the S&P 500. One rapidly comes to the conclusion that the only thing that matters is the weighted average valuation level paid, and if valuing by today's situation, the ending market valuation levels.
The shares that were bought cheaply were a spectacular decision. You'd need a table of expenditure by year to see how many that was, which is easy. But you also run into the subtler problem of the change in valuation levels to recent high levels--was that foreseeable? Has all the increase been justified? Are current prices just luck making old decisions look somewhat smarter than they were? Tough to assess.
We don't know what the precise intrinsic value of a share is on any given date, but such a thing does exist. So one thing we know for sure: to the extent that the weighted average valuation level paid was true fair value at the time, no repurchase increased the value of a remaining share. It might however have been a better decision than alternative uses of the money which might have been less than neutral.
Jim
