Photo illustration: John Paczkowski / Metro-Goldwyn-Mayer
Activist investor Carl Icahn is laying down his sword, ending a months-long campaign to force Apple to implement a bigger stock buyback.
In a letter published Monday, Icahn cited Apple’s recent repurchase of $14 billion worth of its own stock as the reason for ending his call for the company to buy back an additional $50 billion of its stock.
“We see no reason to persist with our nonbinding proposal, especially when the company is already so close to fulfilling our requested repurchase target,” Icahn wrote.
Icahn’s decision to drop his proposal for a bigger buyback comes one day after proxy-advisory firm Institutional Shareholder Services recommended that Apple shareholders reject it. That proposal would have been put to a vote at Apple’s annual shareholder meeting on Feb. 28.
Icahn, who owns roughly $4 billion in Apple shares and has been agitating since late summer for the company to return some of its $160 billion cash pile to shareholders, continues to have strong opinions about the matter, of course.
“We are pleased that [Apple CEO Tim Cook] and the board have exhibited the ‘opportunistic’ and ‘aggressive’ approach to share repurchases that we hoped to instill with our proposal,” he said. “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.”
Apple shares, which have risen about 11 percent over the past year, rose another 1.19 percent on the news.
Apple declined to comment. Icahn’s letter in full, below.
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.
Carl C. Icahn