ISS: Apple Inc. Shareholders Should Vote No On Icahn’s Buyback

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ISS recommends Apple Inc. (NASDAQ:AAPL) shareholders to vote against Carl Icahn’s share buyback proposal when it comes up for voting at a February 28 meeting.

Proxy advisory firm Institutional Shareholder Services called activist investor Carl Icahn’s proposal unnecessary in a note to clients on Sunday.

Proposal leads to micromanaging Apple

Carl Icahn managed to get a non-binding proposal placed on Apple’s annual meeting proxy ballot. He wants Apple to buyback $50 billion worth of shares as soon as possible. He has been urging shareholders to vote for his proposal. However, Apple Inc. (NASDAQ:AAPL) won’t have to comply if shareholders vote in favor of his proposal. Carl Icahn’s proposal is just a fraction of what he originally wanted though, which was an immediate $150 billion share buyback.

In a recent tweet, activist investor Carl Icahn provided his own estimate of what Apple Inc. stock might be worth. He priced Apple Inc. (NASDAQ:AAPL) according to Google Inc’s multiple. He said Google is trading at 19 times 2014 estimated operating profit. At that same multiple, Apple would be worth $1,245 a share, according to Icahn.

The proxy advisory firm ISS said in its note on Sunday that Carl Icahn’s proposal would ‘micromanage’ Apple’s capital allocation process.  However, ISS did critique Apple Inc. (NASDAQ:AAPL)’s failure to fully articulate its long-term capital needs to shareholders. ISS said the ‘good-faith’ efforts the board has already taken and its historical stewardship warrant support.

Apple’s $14 billion buyback

Apple Inc. (NASDAQ:AAPL) repurchased $14 billion of its stock over the last two weeks, after a disappointing earnings call on January 27. The buyback eclipses the $5 billion increments in each of the prior two quarters. In sum, Apple Inc. (NASDAQ:AAPL) has repurchased approximately $40 billion of it stock in the last 12 months. Approximately $18 billion remains of the company’s $60 billion buyback authorization.

In its note, ISS indicated that the iPhone maker has not been wasteful in spending money on unnecessary acquisitions. ISS also noted that the vast majority of Apple Inc. (NASDAQ:AAPL)’s cash is held overseas. Bringing it back would entail either incurring a big tax bill, or borrowing debt that could lower Apple’s credit rating.

About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports