In 2013, Carl Icahn took over the largest company in the world. The activist built a 1 percent stake in Apple, disrupted it “funny” hoarding cash, demanded a $ 150 billion share buyback and threatened to force shareholders to vote.
Both the market and the company took it seriously. Apple’s stock rose when it bought the stock and fell when it eventually sold. CEO Tim Cook felt obligated to dine with the veteran corporate striker and listen to his views.
Not all of these were on the money. Icahn was convinced that Apple would produce a TV by 2016 and a car by 2020. He was unusually specific: TVs would be 55 and 65 inches. Such products did not appear.
But his primary point was: the stock was ridiculously undervalued, trading at a significant discount on the S&P 500 despite Apple’s record of consistent growth and strong profits.
That is no longer the case. Apple was worth only $ 424 billion when Icahn revealed its $ 1 billion starting position. His market capitalization exceeded $ 3 billion this week and now trades at a large premium to the index.
Icahn did not reap the benefits. Citing concerns about Apple’s prospects in China, he left in 2016. He earned $ 2 billion in trade, but would have earned tens of billions if he had stayed.
Part of the reason for the increase is that Cook has successfully shifted the revenue mix from hardware like the iPhone to software and services that are more reliable and profitable.
But he also let go of the cash. Although Icahn’s refund recipe was not fully complied with, Apple significantly increased shareholder payments. The company paid its first dividend in 2013. It now returns more than $ 100 billion a year to shareholders.
Apple founder Steve Jobs jealously guarded the world’s largest corporate piggy bank, which he nearly bankrupted in the 1990s. But breaking into it has helped the company increase valuation, providing a higher class of protection.
All the activists who are trying to follow Icahn today believe that the stakes have been raised. Buying a stake of 1 percent seems out of reach, it has nothing to do with raising enough shares to really strengthen the board.
But other things have changed since 2013. Size is less important if an activist has solid records or a trendy theme. Activists on motorcycle number 1 had a small stake in ExxonMobil, but gained larger shareholders to force a change in the company’s emissions policy.
Oddly, Apple seems more sensitive to activist pressure than it was from Icahn. A new type of activist buys small stakes and uses them to promote shareholder decisions. The sympathetic New Securities and Exchange Commission is facilitating this by allowing decisions to be made when officials have previously been able to help the company get them off the ballot.
Apple on Thursday announced proposals to be voted on in March. They include six shareholder proposals ranging from banning closure clauses for employees who suffer discrimination to increasing transparency about how a company removes apps from its App Store.
These topics present a much more complex challenge than previous cash needs. Even worse for Apple: it can no longer rely on its largest shareholders to stick to the corporate line. It is enough for Tim Cook to wish for dinner with Carl Icahn.