[OC] Apple’s cash flow statement visualizedSubmitted by giteam t3_zyxclj in dataisbeautiful
TA_faq43 t1_j28c3lc wrote
Wow. Is stock buybacks really “negative” flows though? Always thought it was stock manipulation.
DragoonXNucleon t1_j28wk15 wrote
Sure, its a negative flow, but think of the implication.
They spent nearly as much buying back stock as they spent running the fucking company. So where did that money go, well it went to shareholders. Ok, so who are shareholders. Well, a lot of us have small amounts but a lot of them have big amounts. Except in a buyback its not the shareholders are given payments in cash. No, instead shares are taken off market, so the singular share goes up in value? Whys it matter? Taxes. If your asset appreciated you don't pay taxes until you sell. If they just did a dividend, you would pay taxes now.
So ultimately this is a company making so much profit they can distributing it to their investors in a tax free way. Yet, their balance statements show a loss.
redditseddit4u t1_j29niz0 wrote
A couple things to point out. #1 Apple spent about $300 billion in costs of revenue and operating costs which is more than they spend in stock buybacks. That’s not conveyed in the chart since the chart just has net income. #2 when a company does a stock buyback, they’re literally buying back their shares. ‘Normal’ tax rules apply if you’re a stockholder selling your shares back to Apple as part of their share buyback.
Hamoodzstyle t1_j29ysiz wrote
The person selling their shares to apple is not the only one benefiting, it's also every other shareholder who now owns shares that are higher in demand and thus are worth more money.
Obvious_Chapter2082 t1_j2bpiix wrote
The higher demand is offset by the lower total equity though. Value per share remains unchanged
Hamoodzstyle t1_j2bq2wn wrote
Doesn't lower total equity (i.e. number of outstanding shares in the market) with unchanging valuation results in higher value per share.
Obvious_Chapter2082 t1_j2bqfe4 wrote
The valuation does change though. Outstanding shares decrease, and the amount of total equity also decreases by an equivalent amount (since treasury stock reduces company equity). Since these 2 amounts offset, the company value per outstanding share doesn’t change
There are outside factors that could increase or decrease stock price though, it’s just that people usually conflate this with buybacks
JesterSooner t1_j2cmn0o wrote
Well, you aren’t paying taxes on it because you haven’t profited off the increase in value yet. The profit occurs when you sell, hence the taxes.
Like if you own a baseball with Babe Ruth’s signature it will go up in value with time, but you won’t actually get any cash from that unless you sell the baseball. Let’s say you were taxed on that increase in value before selling… ok, so you pay the tax even though you haven’t actually gained any money yet. After you pay the tax, you have the ball re-appraised and find out to your surprise that the signature is fake. Suddenly, your ball is worthless and you just paid taxes for money that you never actually had. Stocks work on a similar principle because “value” isn’t the same as “profit”
DragoonXNucleon t1_j2dqdpi wrote
Sure, its logical to not pay taxes, except its part of an increasingly common tax avoidance scheme.
Earn all money via stocks. Take out loans against those stocks. Never pay the loan back. Repeat the process and those that are uber rich never pay any taxes but have near infinite spending money.
So the rest of us give up 30% of our income and yet those who benefit from these buybacks pay 0.
JesterSooner t1_j2ef52s wrote
What bank anywhere in the world is giving out loans that don’t get paid back?
Yeti-420-69 t1_j28fivn wrote
Stock manipulation?!?!?!? It's giving directly back to shareholders... It's a strong statement that leadership believes their stock is undervalued and that the best investment they can make is in their own company. Stock manipulation lmao
Edit: and to answer your question... Of course it's negative in this context, the money is spent.
chouseva t1_j28mwz5 wrote
It's also a strong statement that leadership doesn't want to get fired, and that leadership would love their equity stake to increase in value. Stock buybacks are not investments in the company, as Apple already got everything they were going to get when the shares were floated. Apple has been sitting on an absolute pile of cash for a long time.
Sadoksad t1_j28xngx wrote
Stock buy backs are essentially dividends paid out with out the extra tax that investors have to pay (Tax on the dividend AND Tax on the capital gain compared to just tax on the capital gain). Its also easier to manage than paying out dividends to every single investor. Provided the investor is smart enough to take some of his gains out. The rising prices does provide additional liquidity to the big players. In essence, you the layman with his 401k is only there to get screwed over.
Hamoodzstyle t1_j29z78u wrote
Not sure I agree that 401ks are really getting screwed over here. Your standard 401k with some ETFs holding apple stock get more valuable as a result of buybacks. That means more money in the hands of say a retiree pulling money out of their 401k.
Sadoksad t1_j2a0ya3 wrote
You're not wrong but the issue is that the rising price is not sustainable, ie short term. This is because the company no longer wants or needs to retain all that money to grow the business. Over time, the market starts discounting that factor and the buy back gain that you had unrealized, no longer exists. Meaning, you lost out on your dividends. If you take an active role in your personal investments or if you've given your money to some sleazy fund, they'll make sure you're out before the market is. 401k's usually lag behind. I'm not saying you won't be profitable at all, you just lose out on that 'extra profitability'.
Yeti-420-69 t1_j2bw4ny wrote
That's not how market cap works, brother.
Sadoksad t1_j2d3cp2 wrote
shiii mind explaining where I went wrong in my understanding?
Yeti-420-69 t1_j2d4zyj wrote
You have a lemonade stand. Between your 100lbs of lemons, 18 kilos of sugar, some ice cube trays, a table, and the earning potential it has over the next few months, you figure you could sell the business for $1000. This is your 'market cap'.
You want some cash right now to buy a new sign to go over your table and some other things so you decide to 'take your business public' and let 3 of your friends buy in. You split the company into 4 equal 'shares' and value them at $250 each.
Over the summer you all take turns working the stand, you reinvest the profits and open a second stand. Everything is going great until fuckin' Steve decides he's done working, wants to divest of his part of the company and relax until school starts up again.
The company is bigger now, has more inventory, more growth potential, more revenue, cash on hand from recent sales, you all decide to value it at $4000. Now if someone had $1000 they could purchase his share for themselves, but nobody has taken any profits, so instead the company buys back his share with that cash on hand. So by spending $1000 the company is now worth $3000 and is split 3 ways as that share was destroyed. Your shares are still worth $1000 each but now you own a larger piece of the company. This will mean a larger cut of future profits in the form of dividends and greater growth potential in the price of the stock, as future valuations will divide the market cap by 3 instead of 4.
I'm stoned and that seemed like a good way to explain it lol I hope it makes sense.
Edit: and I'm not American but isn't a 401k just a type of retirement account? They're just going to hold index and mutual funds.. those don't 'lag' the market, they're just collections of different equities and bonds.
Sadoksad t1_j2denk6 wrote
I didn't need you to explain market cap but thanks for the effort, I'm sure it will helpful to someone. The reason I asked you was because I wanted to know your opinion or your angle on the buy back of apple, that is the same angle I took when I wrote the other downvoted comment.
>This will mean a larger cut of future profits in the form of dividends and greater growth potential in the price of the stock, as future valuations will divide the market cap by 3 instead of 4.
The reasoning I used was, Apple isn't a growing company. Its well mature. I don't think we'll be seeing larger future profits in the form of dividends or greater growth potential. I mean with their product range ever increasing in price, I can't imagine they'd be breaking their sales record any time soon. I personally don't see them growing atleast in the next 5 years unless they come up with better innovation and cheaper prices.
The scenario that you explained is perfect for share buy backs of growing companies that are undervalued. They eventually increase value for the investors long term. But if the shares are overvalued keeping in mind its future prospects, and then you buy them back, it hurts the share holders long term. Any fund manager worth his salt will recognize that and will underweight his position at the very atleast. 401k, which like you said are a bunch of mutual funds and ETFs aren't known to be ahead of the curve. Which is what I meant by lag.
At the end of the day all my comments were entirely based upon the fact that I don't see Apple growing. Which is my opinion and I can of course be wrong.
Edit- Fuck. Now you have me doubting. Am I still wrong?
Yeti-420-69 t1_j2dgqg7 wrote
I'm just talking generically, I didn't have Apple in mind, but yes I still think you're incorrect. Reduction of the float is permanent.
I hate Apple's business practices and agree they have peaked. It's been dead to me since the 4S
Kazekt t1_j2d2r1n wrote
Nothing less motivating than money spent 🙄
Relativity
Interesting way to teach service.
Yeti-420-69 t1_j2d3v5n wrote
I know what all of those words mean, but not in that order.
Kazekt t1_j2d3y5s wrote
“I’ll show you where to look but not what to see” What do you think?
Yeti-420-69 t1_j2d5ngc wrote
Go away please, crazy person.
Hapankaali t1_j28xn9q wrote
Aren't the leadership shareholders themselves? If so, it's more of a strong statement that they like money.
Yeti-420-69 t1_j28xy1t wrote
I get that this isn't an investing sub but guys.. come on.
If it's good for them it's good for all shareholders. It is their fiduciary responsibility to do what is best for shareholders.
Hapankaali t1_j294uzl wrote
It's good for the shareholders' bottom line short-term, but can be bad long-term if good investments are withheld.
Of course the owners of the company (and their proxies, i.e. management) have every right to cash out now when the company is doing well and it's understandable they care more about nice things now than the future of the company, but to suggest this is somehow a "responsibility" is some bizarre balls-gargling.
Yeti-420-69 t1_j298gf0 wrote
It is literally illegal for them to not do what's going to provide the best return to shareholders. Shareholders would need to take issue with whatever action was taken and take the board to court, but nobody is doing a stock buyback to personally enrich themselves.
You've mangled so many terms here I don't know where to start... Do you think there's a difference between owners and shareholders? Cashing out means selling shares, doing a buyback relies on the market to uphold the current valuation and increase the share price to keep the market cap level. If the market thinks insiders are only doing the buyback to 'cash out' and that it's not in the best interest of the corporation, that won't happen.
I'll let you get back to childish insults now.
A_PlantPerson t1_j29f9qv wrote
>It is literally illegal for them to not do what's going to provide the best return to shareholders.
That is an often repeated misconception. A director has a duty of loyalty and care. As long as any decision is made in entire fairness or approved by an independent director courts historically give a lot of leeway. And rightly so. Firstly because most decisions that increase shareholder value on an arbitrary timescale are undesirable and a lot of decisions that will have a negative impact on shareholder value on an arbitrary timescale might still be very attractive. Secondly, it would paralyze the decision-making process.
Just like dividends- share buyback is- in theory- a value-neutral transaction for shareholders (except some tax benefits) but it is a pretty bad signal to give for a tech company imo (what apple is communicating to shareholders is that they can't find a better way to invest the money that would generate value) and has some inherent risks for the company.
Yeti-420-69 t1_j29il8b wrote
I don't disagree with anything you've said.
Hapankaali t1_j29gxxy wrote
>It is literally illegal for them to not do what's going to provide the best return to shareholders.
Yes, management famously only takes decisions that are best for the company. All they have to do is pinky swear that they believe they are acting in the best interests of the company.
>nobody is doing a stock buyback to personally enrich themselves.
Well, except for the ones who are.
>Do you think there's a difference between owners and shareholders?
No? God forbid people use synonyms!
>Cashing out means selling shares
No, not necessarily.
>doing a buyback relies on the market to uphold the current valuation and increase the share price to keep the market cap level
So what?
>If the market thinks insiders are only doing the buyback to 'cash out' and that it's not in the best interest of the corporation, that won't happen.
"The market" thinks Bitcoins are worth $16,524 and that Gamestop increased in value more than 50-fold in a few months' time.
Yeti-420-69 t1_j29iycl wrote
You're hopeless. Goodbye
Obvious_Chapter2082 t1_j2bpg44 wrote
A lot of people think it’s stock manipulation, but it’s not. Buybacks don’t change the share price, it’s just a way to get cash to investors
GangNailer t1_j295oxu wrote
Because it's literally the investors running away with the money, leaving the employees who labored for it high and dry.
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