Carl Icahn withdraws buyback proposal as institutional advisory firms side with Apple

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Billionaire activist invester Carl Icahn has dropped efforts to push Apple to spend its considerable sum of cash on its own shares. Icahn announced that he would be withdrawing his proposal via an open letter to Apple shareholders following prominent institutional advisors Institutional Shareholder Services (ISS) and Egan-Jones advising shareholders to vote against Icahn’s resolution.

From the ISS report (via Reuters):

(The Apple board) has returned the bulk of its U.S.-generated cash to shareholders via aggressive stock buybacks and dividends payouts. In light of these good-faith efforts and its past stewardship, the board’s latitude should not be constricted by a shareholder resolution that would micromanage the company’s capital allocation process.

Proxy advisory firm Egan-Jones also advised shareholders to vote against Icahn’s plan.

Carl Icahn has been buying large amounts of AAPL stock in recent weeks, bring his current holding to around $4.1 billion, giving him roughly a 1% stake in the company. He has repeatedly called for Apple to repurchase a minimum of $50 billion in shares before submitting a formal proposal which shareholders were set to vote on this month.

However, Icahn has now withdrawn this proposal stating: “we see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested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”.

In a move described as “aggressive” by CEO Tim Cook, Apple recently repurchased $14 billion in shares following a steep 8% drop in share price after their first quarter earnings were announced, bringing the company’s total spend on stock to around $40 billion in the last twelve months.

Here is Icahn’s letter in full:

Dear Fellow Apple Shareholders,

While we are disappointed that last night ISS recommended against our proposal, we do not altogether disagree with their assessment and recommendation in light of recent actions taken by the company to aggressively repurchase shares in the market.

In their recommendation, ISS points out, and we agree, that “on the spectrum of options for allocating capital, the board appears to have been sluggish only in returning excess cash to shareholders,” and even though the company has in place “one of the largest buybacks in history” we agree with ISS that this effort seems “like bailing with a leaky bucket” when “given the scale of the company’s cash reserves.”

That being said, we also agree with ISS’s observation, taking into account that the company recently repurchased in “two weeks alone” $14 billion worth in shares, that “for fiscal 2014, it appears on track to repurchase at least $32 billion in shares.” Our proposal, as ISS points out, “thus effectively only asks the board to spend another $18 billion on repurchases in the current year.”

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.

Furthermore, in light of Tim Cook’s confirmed plan to launch new products in new categories this year (in addition to an exciting product roadmap with respect to new products in existing categories), we are extremely excited about Apple’s future. Additionally, we are pleased that Tim and the board have exhibited the “opportunistic” and “aggressive” approach to share repurchases that we hoped to instill with our proposal. It is our expectation that Tim and the board continue to exhibit this behavior as fiduciaries to the shareholders since they clearly seem to agree that our company continues to be extremely undervalued, and we all share a common optimism with respect to the company’s bright long term future.

Sincerely yours,

Carl C. Icahn

Source: Reuters, Shareholders’ Square Table

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  • BillThomas

    I’m glad that it didn’t go through for Icahn, he sounded like a pushy asshole!!