Apple Inc wowed the debt markets on Tuesday with the largest non-bank bond deal in history, pricing a whopping $17 billion as the US computer giant switches strategy to placate restless shareholders.
Just a week after announcing its first drop in quarterly earnings in a decade, Apple came to market with the massive deal to raise funds for an ambitious programme that will return $100 billion in cash to holders of Apple shares.
Sources said investors could barely submit orders fast enough to get in on the deal from Apple, the only major tech company without a single penny of debt on its books.
The six-part all-dollar offering attracted more than $50 billion of orders by midday in New York – a massive level of demand even in the current red-hot climate of the bond markets.
“Apple made its intentions clear that this deal is for shareholder-friendly activity, but they have tremendous metrics and brand recognition,” Rajeev Sharma, portfolio manager at First Investors Management Co, told IFR. “Apple is something everyone wants in their portfolio.”
Earlier, a source said potential investors had been told on Monday that this would be Apple’s only bond deal of the year, apparently scuttling hopes of possible euro or sterling issues – and helping fuel demand for Tuesday’s mega-deal, which was led by Deutsche Bank and Goldman Sachs.
The massive deal caps a milestone week for Apple, which in seven days has changed tack to satisfy its investor base, becoming the world’s biggest dividend payer and recapturing its mantle as the world’s largest company by stock market value at $413 billion.
Investors unhappy with chief executive Tim Cook’s previous reluctance to share any of Apple’s massive $145 billion cash pile with shareholders – and unimpressed by its diminishing prospects for earnings growth – had been relentless sellers of Apple’s stock since its share price topped out above $705 in late September.
Expectations for future profit growth have trailed off significantly in the past year. After 10 years of high double-digit profit growth, analysts on average now expect a 10-year compound annual earnings growth rate of less than seven per cent, according to Thomson Reuters StarMine, which tracks analyst forecasts.
Although the company has a staggering $145 billion in cash, only $45 billion of that is readily available in the US – meaning Apple needs to raise about $60 billion over the next three years to fund the shareholder capital return plan.