Apple sued by Investors

grizzly1911

Apple sued by David Einhorn over cash pile

An activist shareholder is suing computer giant Apple, demanding that it share out more of its $137bn (£87bn) cash pile to its investors.
Apple's cash pile has grown to that size from $98bn last March.
US hedge fund manager, David Einhorn, who is behind the unusual move, told the television channel CNBC that Apple had a "Depression-era" mentality, which gave it a tendency to hoard cash and play safe.


http://www.bbc.co.uk/news/business-21377915


I am surprised it has taken so long.


Could this be a nod to other corporates in similar position?


As a company Apple has undoubtedly been successful in hoovering up discretionary spending form consumers, no doubt placing a number into debt in the process. If that money isn't released back into the economy isn't it like a recalcitrant gambler leaving with the pot mid game?


Is it healthy for shareholders if corporations are sitting on money? Are they generating the return expected against what they could achieve doing what they are good at? If companies are scratching around for market at lower margins, or just marking time, is it sign that the brand value is on the wane?



.

Wookster

It is not healthy for corporates to be sitting on such huge piles of cash however returning it to shareholders does pose a problem.

AIUI large portions of the cash have been derived outside the US and remain there. Under current US tax law remittances of foreign dividends is subject to 30-35% tax (!) which is among the highest in the world, if not the highest. This obviously makes corporates reluctant to bring cash into the US with the aim of returning it to shareholders.

IMO another reason for Apple hoarding cash is Steve Jobs who felt it necessary to hoard cash for R & D (and as a war chest to fund Apple's vendetta against Android?). Tim Cook has said in interviews he is more open to looking at ways of returning cash to shareholders.

This is a classic case of an uncompetitive tax regime seriously damaging the home country.

IronWolf

Wooksters exactly right. I believe it was in 2011 when Apple, Amazon and Microsoft all appealed to the US for a holiday in repatriating overseas profits. It was denied.

Plenty of other companies doing the same and the US is very strict on measures used to avoid these taxes.

I think many companies are just waiting in the hope that they get the eventual holiday and can bring all the cash back. It seems a silly move for the US to be keeping so much money OUT of the economy when it could be put to far better use inside it. Let's face it, a lot of these companies just aren't going to repatriate it.

Thrugelmir

Apple paid an effective international corporation tax rate of 1.9% in 2012.

Only right that the spoils should be shared between investors and governments.

Masomnia

If he doesn't like the way it is run he can vote at the AGM, or sell his shares.

Why on Earth should he be able to sue them, just for not doing as he would want them to?!

Generali

Thrugelmir wrote: »

Only right that the spoils should be shared between investors and governments.

Why, for example, should part owners of Apple in Tanzania pay extra taxes to the US Government?

That doesn't seem reasonable to me.

Thrugelmir

Generali wrote: »

Why, for example, should part owners of Apple in Tanzania pay extra taxes to the US Government?

That doesn't seem reasonable to me.

If Verizon make a bid for Vodafone.

Why should the UK Treasury pick a potential £30 billion capital gains tax windfall?

Where do suggest drawing the line. Given that Apples cash pile grew by $54 billion last year. Yet only spends $6 - $7 billion annually on R&D.

Generali

Thrugelmir wrote: »

If Verizon make a bid for Vodafone.

Why should the UK Treasury pick a potential £30 billion capital gains tax windfall?

Where do suggest drawing the line. Given that Apples cash pile grew by $54 billion last year. Yet only spends $6 - $7 billion annually on R&D.

I don't disagree that Apple should return money to investors but to turn the paying of taxes to a particular Government into a moral stance seems a bit odd when discussing a company that operates across borders.

That's what you appeared to be doing but feel free to correct me if I misinterpreted you.

Thrugelmir

Generali wrote: »

I don't disagree that Apple should return money to investors but to turn the paying of taxes to a particular Government into a moral stance seems a bit odd when discussing a company that operates across borders.

Doesn't Vodafone operate across borders?

The issue for Apple is US tax. For Vodafone UK tax.

As for dividends if not a US citizen. Then the investor will suffer 30% withholding tax on dividends.

Investors have already suffered a 35% fall in share price from peak. So seems reasonable that they receive a return in some form. Perhaps an issuance of capital in some form of stock. At least alleviates the tax position slightly.

grizzly1911

Generali wrote: »

I don't disagree that Apple should return money to investors but to turn the paying of taxes to a particular Government into a moral stance seems a bit odd when discussing a company that operates across borders.

That's what you appeared to be doing but feel free to correct me if I misinterpreted you.

I wasn't aware that the US authorities were so penal until this thread.

I am getting tired of big corporates playing peek a boo with their tax arrangements though.

Their profits are a loss for someone else. If they don't put back into the system they can't keep withdrawing from it.