[padmanabhan01]

//Apple could borrow the $600B at dirt cheap rates and go private asap

Ok, so you mean Apple (the public company) borrows money, and then goes private. Now who would that private entity be? And which entity would be repaying that loan now since Apple (the public company) that borrowed money would no longer be an entity as it went private.. care to clarify?

[gnoway]

Presumably it would be an ownership group like e.g. Tim Cook + some other people borrowing the money, and/or they'd partner with a P/E firm. Isn't that what Dell did a couple of years ago?

[dpark]

Sure. If Tim Cook and "some other people" could borrow 600 billion dollars, they could buy Apple. Turns out that it's really hard to get a loan for that amount though.

And regardless this has nothing to do with Apple running a stock buyback.

[brianbreslin]

the entity is still the same, apple, inc. apple inc can choose how many of its shares are available on the public market, or undistributed, or distributed to existing shareholders. So assume 50% of shares are distributed (assume 500M shares for simplicity sake), they gradually buy back shares, and the outstanding shares can either be worth more or less (usually more).

In the case of Dell, Michael Dell was the largest independent shareholder, he partnered with a private equity firm to buy outstanding shares back, and then the Dell, inc. entity has to pay back the private equity firm with revenues from sales and sales of assets.

[icedchai]

What? It's still the same entity, whether it's public or private.

[dpark]

It would be a self-owned corporation. What does that even mean?

[icedchai]

No, it would be owned by a small pool of insiders.

[dpark]

Do you really not see the problem with this scenario? Apple "goes private" and somehow ends up in the hands of "a small pool of insiders"? How do those insiders end up holding 100% of the stock?

Right now insiders hold maybe 1% of Apple stock. So there's a 99% transfer of ownership happening when the company "buys itself". Does the company lose 99% of its value in this or is there somehow a transfer of about 500 billion dollars into the hands of these insiders? How are either of these situations not entirely terrible?

[icedchai]

I agree it is completely unrealistic. This is a fantasy scenario originally described on Seeking Alpha, and most of us are just having fun with it (I think.)

It will never happen and is logistically impossible: you are absolutely correct.

[dpark]

It's a flawed fantasy scenario though, and not just because it's implausible. For this to happen the vast majority of the company's value must be destroyed.

Imagine the final two shareholders, each holding one share with 250 billion. For the company to buy one of these shares, it will require 250 billion in cash. The value of the company will drop by 250 billion after this transaction (because it just spent all that money) and therefore half the value has been destroyed. Now do the math upward and you'll see that to buy the 3rd share, the company lost 1/3 of its value. And for the 4th it lost 1/4 and so on.

Putting the entire company into the hands of a few insiders would require destroying virtually all the value in the company, including liquidating its assets because the market cap is far higher than the cash on hand is or could be (because market cap will always reflect cash on hand). In fact, if Apple tried to "go private" this way, it would fail to do so because much of its value is in intangible assets like tribal knowledge that cannot be sold. It does not have tangible, fungible assets that total to its market cap.