Spent $ 500 billion .. How does Apple benefit from buying back its shares?

Apple executed aggressive share buybacks of nearly $500 million over the course of 11 years.

Apple, the world's technology and phone giant, used a mechanism to buy back treasury shares at a value of 500 billion pounds over 11 years.

And this value that Apple used to buy its shares exceeds the market value of Visa, which is estimated at $ 489 billion, or JPMorgan, which is estimated at $ 446 billion, or Exxon Mobil, which is estimated at $ 441 billion.. So why does Apple resort to this mechanism?

Treasury stocks

Capital market experts say that the use of share repurchases from the stock exchange, or what is called treasury shares, helps the company to pump more liquidity into the stock and revive transactions on it, which gives it an increase in the market value and protects it from the risks of unwanted acquisitions through the stock exchange. 

An analysis from Markets Insider showed that Apple has spent more than $500 billion in stock buybacks over the past decade, which amounts to a quarter of its $2.7 trillion market value.

stock purchase

According to Markets Insider, Apple has spent more than $50 billion annually buying its own stock since 2018, spending $90 billion in the last fiscal year, and buying $56 billion of its own stock in the 9 months to July 1 of this year.

And iPhone's board of directors finally approved another $90 billion worth of buybacks. This amount exceeds the total value of Citigroup ($85 billion) and is close to twice the market value of The Hershey Company ($46 billion).

The iPhone buybacks have reduced the number of shares outstanding by more than a third, from about 25 billion to less than 16 billion, said Charlie Pellilo, chief market analyst at Creative Planning.

A longtime champion of buybacks, American billionaire Warren Buffett has been a fan of Apple buybacks. His Berkshire Hathaway empire owns roughly 6% of Apple, and the center accounts for nearly half of its roughly $350 billion stock portfolio.

Buffett stated that when Apple buys back shares, it consolidates ownership of Berkshire at no cost to the group. “The company used much of what it held to buy back Apple shares, which we commend,” he wrote in his 2021 letter to shareholders.

"Apple's flamboyant CEO, Tim Cook, quite rightly considers Apple users his first love, but all of his other categories also benefit from Tim's managerial touch," he added.

Buybacks

For his part, Dr. Mutasim Al-Shahedi, a financial market expert, said that some cash-generating companies, which enjoy a large surplus of liquidity, seek to achieve the largest possible profit by investing this liquidity, and then their best investment is to resort to repurchases or purchase treasury shares. It is for the company to use its liquidity to buy its shares traded on the stock exchange and achieve a good return.

Al-Shahedi added, “The purchased shares can be used to achieve added value and a profitable investment for the company, whether by reducing the number of shares after preparing the buy-back shares, and then the market value of the share increases significantly, in addition to creating liquidity on the share that raises the trading rate, and then increases the value.” vulgarity.”

The financial market analyst stated that the company can use purchased treasury shares or repurchase shares and distribute them to workers for reward, with the aim of maximizing the value of work and motivating them to increase production, and thus achieving a double benefit.

He added that executing repurchase shares or treasury shares raises the share of the main shareholders without any new activity for them, and without adding new funds, pointing out that there are companies that use treasury shares to prevent hostile takeover of them by a specific investor, so they buy the shares and then raise their value, which makes it difficult other investors have to buy a share of the shares.

He explained that the company also buys treasury shares if the trading price is less than the book value of shareholders' equity, which helps in raising the book value of the remaining shares in the market.