If big name investor Carl Icahn was playing a game of chicken with Apple, he just lost. Mr. Icahn has been pressuring the iPhone and iPad maker to aggressively increase its stock buyback program, but on Monday morning he dropped his campaign saying he saw "no reason to persist."
Carl Icahn: Never mind on my AAPL stock buyback plans
Mr. Icahn's announcement came after the proxy advisory company Institutional Shareholder Services, or ISS, advised Apple's shareholders to vote against Mr. Icahn's proposal. Apple has been opposed to Mr. Icahn's proposal, too, and company CEO Tim Cook thinks the board is already acting aggressively with buyback plan.
Apple is in the middle of a US$60 billion stock buyback plan that Mr. Icahn has felt needs to be much bigger. He initially proposed pushing the program up to $150 billion, but later scaled his proposal back to $110 billion.
In an open letter to investors, Mr. Icahn said,
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.'
Mr. Icahn added that he was pleased to see Apple spend $14 billion over a two week period buying back stock and looks to be on track to repurchase upwards of $32 billion in fiscal 2014. He added, "Our proposal, as ISS points out, 'thus effectively only asks the board to spend another $18 billion on repurchases in the current year.'"
An agressive stock buyback program has real benefits for Mr. Icahn since he's already invested well over $3 billion in the company's stock. As Apple buys back its own stock, the value of what's left on the market goes up.
Mr. Icahn had been planning on using Apple's annual shareholder meeting at the end of February to push for a more agressive buyback program, but it seems now he doesn't see a need for that.
"We see no reason to persist with our non-binding proposal," he said, "especially when the company is already so close to fulfilling our requested repurchase target."