Apple lost $9 billion buying back its own stock in 2018

GettyApple CEO Tim Cook.
  • Apple spent nearly $US63 billion on share buybacks in 2018 so far, not including the fourth quarter.
  • Some of those purchases were at the stock price of $US222, but now it is trading at $US156 per share.
  • The value of Apple’s buybacks is $US9 billion less than when Apple purchased the stock, The Wall Street Journal reports.
  • Apple announced $US100 billion in buybacks earlier this year, and as much as 70% of the war chest hasn’t been spent yet.

Apple spent most of 2018 ravenously buying back its own stock on the open market, fuelled by a large tax windfall and management’s belief that shares were undervalued.

Through the first nine months of 2018, Apple spent $US62.9 billion on share buybacks, a record-breaking and staggering sum that happens to be exactly equal to Apple’s revenue in the quarter that ended in September.

Now, it looks like that might have been a bad investment, according to a report in The Wall Street Journal.

Apple bought those shares at prices as high as $US222.07, according to the report. But Apple’s stock has slid more than 30% from its peak in October to a price on Friday of $US156.15 per share.

That means that the shares Apple bought for nearly $US63 billion were worth $US53.8 billion on Wednesday – a $US9.1 billion loss of value, according to The Wall Street Journal.

Apple can probably afford it. The company continues to mint money, and it was clear after Republican-driven tax reform last December that it planned to spend a lot on stock buybacks. And while Apple is most likely spending more money on share buybacks than any other publicly traded company, it’s part of a trend, in which US companies across the board are spending more than ever on share buybacks.

But it’s still not a good sign for Apple that its primary investment in terms of dollars last year declined so much, so quickly. It bought about 6.7% of outstanding shares this year, according to the report.

“If they made an acquisition that decreased in value this much, people would be up in arms,” Nell Minow, vice chairwoman of ValueEdge Advisors, told The Wall Street Journal.

In May, Apple CEO Tim Cook said that Apple buying back its shares was “good for the economy” because of the taxes paid on capital gains.

Economists that Business Insider spoke to were confused by the remark, pointing out that the traditional point of stock buybacks is to drive the stock price higher and make earnings-per-share look better.

Apple’s not done buying back its stock. It still has $US70 billion to spend on share repurchases as part of the program it announced in the spring, according to Philip Elmer-DeWitt, an independent journalist.

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