Apple is about to embark on a record-breaking period of share buybacks.
The iPhone maker plans to spend an additional $US100 billion over a period of years to buy its own stock, a move that was made possible by tax reform legislation last December. That’s on top of the $US200 billion the company has already spent on buybacks since 2012.
Many investors like stock buybacks, because they can juice earnings-per-share and drive the stock price higher. Plus, Apple CEO Tim Cook says it’s good for Apple, because he believes the stock is undervalued.
But Cook also said in a recent interview that Apple’s record capital return is good for the economy because investors pay capital gains taxes when they sell.
That’s a novel argument you may not have heard before – and probably for good reason.
Economists from across the political spectrum contacted by Business Insider were unfamiliar with Cook’s argument. In fact, some said the argument was bizarre and even “ironic” given the historical purpose of stock buybacks.
Click here to subscribe to BI Prime and read why economists say the logic behind the Apple CEO’s zeal for buybacks doesn’t add up.
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