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Apple shares: where to next following $7 billion bond sale?

Here’s everything you need to know about Apple’s latest $7 billion bond offering.

On September 4, Apple Inc (All Sessions) completed its first bond sale since 2017 – borrowing $7 billion in the process.

Given Apple’s sizable cash pile – reported to be around $210 billion during the company’s last Q3 release – this latest bond offering may initially seem puzzling to onlookers.

Why go to the bond markets then?

As Bloomberg’s corporate reporter Molly Smith aptly noted: with ‘investment-investment grade bond yields hovering near record lows', the chance to borrow at such low rates, looks to have been an opportunity that the company simply did not want to pass up.

It was further pointed out that Apple’s latest bond sale puts the company in a strong position to refinance a portion of its current debt load – which carries with it higher interest rates than this new debt offering.

What will Apple do with the $7 billion?

Apple’s latest bond sale looks to form an important part of the company’s shareholder-focused capital management strategy.

In Apple’s Q3 report for example, the company noted that it intended to ramp up its share buyback program from $100 billion to $175 billion.

In April, the company also raised its cash dividend from $0.73 per share to $0.77 per share.

Apple Inc (All Sessions) also pointed out that it intends to increase ‘its dividend on an annual basis.’

With this in mind, Apple noted that it intended to use the capital raised from the bond offering for the:

'Repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working, capital expenditures, acquisitions and repayment of debt.’

By reducing the shares floated on the open market through a buyback program, investors effectively gain more ownership of the company. Other metrics, such as earnings per share (EPS) may also rise.

Finally, investors, analysts and market commentators have long speculated that Apple would make a significant acquisition with its growing cash reserves. As is potentially suggested above, this latest bond offering may provide Apple with the impetus to do just that.

Last thoughts

Besides the company’s strong culture of innovation and investor friendly approach to capital management, the Apple Inc (All Sessions) share price has risen significantly YTD, gaining 30% in that period.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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