Billionaire activist investor Carl Icahn said Apple) shares could double in value if it used its $133 billion cash pile in a buy back scheme.
In an open letter to Apple’s board, Icahn said Apple was dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit.
Icahn who said he would be hanging on to his own stock out of any repurchase claimed that Apple stock should be trading at $203.
“At today’s price, Apple is one of the best investments we have ever seen from a risk reward perspective, and the size of our position is a testament to this. This investment represents the largest position in our investment history,” Icahn wrote.
Icahn urged Apple to buy back as much as $100 billion in stock and said he hoped other investors would also press for a buyback.
In June Apple split, its stock seven for one and in April it raised its share repurchase authorisation to $90 billion from the $60 billion announced a year earlier.
Shareholders did not seem that impressed. Apple shares rose less than one percent in early trading to $101.49 but slipped to $100.84 later. The stock has gained 25 percent since January.
Icahn owns 53 million shares and is one of the iPhone maker’s top 10 investors so he will get back a huge amount if the share price doubles. Needless to say he has been urging the company to buy back more shares and raise its dividend.
We would take all this with a pinch of salt. In his letter, he said he expects the Apple Watch, the company’s first new product category since the iPad in 2010, to boost the company’s growth and suggested that television is another large opportunity for the company, which is more than anyone else believes.
Apple has long signaled it will not be pressured into making hasty decisions. On Thursday, spokeswoman Kristin Huguet declined to comment directly on Icahn’s letter but said “We always appreciate hearing from our shareholders.” We are sure she does.