Carl Icahn Buys $500 Million More of Apple Shares, Issues Letter

Activist investor Carl Icahn turned up the pressure on Apple Inc. on Thursday, announcing that he’d bought an additional $500 million worth of stock in the company.

Icahn also filed an official letter outlining the reasons he believes Apple should increase its stock buyback if shareholders approve an advisory ballot measure next month at the company’s annual meeting.

“Bought another $500mil of $AAPL tday, bringing our total to $3.6 billion,” Icahn wrote in an online post. “If board doesn’t see AAPL’s ‘no brainer’ value we sure do.”

The latest update came just a day after Icahn revealed he had acquired $500 million in Apple stock in recent months. Icahn said he has now bought $1 billion in stock in the past two weeks.

In a letter to Apple shareholders, he explained his rationale for his buyback campaign.

“Over the course of my long career as an investor and as chairman of Icahn Enterprises, our best-performing investments result from opportunities that we like to call ‘no brainers,’ ” he wrote. “Recent examples of such ‘no brainers’ have been our investments in Netflix, Hain Celestial, Chesapeake, Forest Labs and Herbalife, just to name a few. In our opinion, a great example of a ‘no brainer’ in today’s market is Apple.”

The big problem, as Icahn sees it, is that Apple is woefully undervalued by Wall Street.

“The S&P 500’s price to earnings multiple is 71 percent higher than Apple’s, and if Apple were simply valued at the same multiple, its share price would be $840, which is 52 percent higher than its current price,” Icahn wrote. “This is a dramatic valuation disconnect that simply makes no sense to us, and it seems that the company agrees with us on this point.”

Icahn said the company has recommended voting against his proposal, saying it needs the flexibility to invest in acquisitions and innovation to remain competitive. But Icahn disagrees.

“We believe that the combination of the company’s unprecedentedly enormous net cash balance, robust annual earnings, and tremendous borrowing capacity provide more than enough excess liquidity to afford both the use of cash for any necessary ongoing business-related investments in addition to the cash used for the increased share repurchases proposed,” Icahn wrote.

Then he gave the company a few good words. He noted his belief that Chief Executive Tim Cook is doing a great job and that there were many new product areas, such as wearables, where the company could enter and make even more money.

“Given the degree to which Apple appears undervalued to us, we almost feel that it’s a waste of time to debate the point,” Icahn said. “As we believe it to be the pre-eminent and most innovative consumer products company in the world, with the greatest brand, hardware, software and services in the world, Apple has had tremendous growth to date, and we fail to see why this growth would not continue moving forward.”