Apple investors see millions wiped off debt bond value

Apple investors see millions wiped off debt bond value

Summary: A big name — but a poor investment?


Investors in the recent Apple security sale have seen value plunge by $760 million.


Investing parties who originally scrabbled to secure part of the tech giant's first bond sale — to the point that firms struggled to keep up with public interest — have seen $760 million wiped off the value, according to Reuters.

The longer-maturing bonds, purchased only weeks ago, have suffered some of the largest losses.

Apple's $5.5 billion 2.4 percent 10-year and $3 billion 3.85 percent 30-year bonds are now both trading at lower points than their issue. The 10-year note traded on Thursday at $92.50 — 7.5 points lower than issue — whereas 30-year bonds were quoted at $87.60, a 12-point loss in dollar pricing.

Bonds in Apple's $17 billion plunge into the debt market have lost value so quickly that it would take roughly three years of interest from the coupons for investors to cover their losses. Rajeev Sharma, senior portfolio manager at First Investors Management told the publication that "if you own this paper, you're sitting on it for three years or selling at a loss."

Although the deal was issued at a good time and executed well in terms of pricing, one senior manager of a bond syndicate desk noted:

"This deal is great for shareholders because of the tight coupons Apple locked in to pay for dividends and share buybacks, but everyone who didn't hedge out rate risk — the Moms and Pops who have money in total-return funds — is looking at dollar losses that will suck up a lot of coupon payments."

Despite originally having no debt and billions in cash reserves, Apple issues the bonds to generate billions for a $100 billion capital return program for shareholders rather than face high tax rates in the United States. The iPad and iPhone maker plans to buy back $60 billion in shares, which will raise shareholder dividends over the next two years as part of the program.

Apple attracted 2,000 orders worth $50.2 billion from 900 investors on the date of the bond sale.

Topic: Apple

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  • People shouldn't buy

    Long term investments then whine when they don't see a short term result.
  • AAPL+Investors=Loss

    It figures. Any investors dealing with Apple are likely to end up under a bus. Everything about Apple seems poisonous to investors. It's hard to understand why a company doing relatively well financially constantly causes shareholders so much grief. From what I'd heard, I thought people that bought the bonds would do rather well. However, the Apple investor curse took control.
    Steffen Jobbs
    • Yeah...

      Like those poor investors that bought Apple stock circa 2001-2003. They've only seen a ~6000% increase to date.

      Curse me with some of that, Apple- please!
  • And It's All Android's Fault

    Just imagine, Apple could have been Number One by now, if it weren't for those pesky open-source kids...
    • Android is just the OS, and the "pesky" parties that have outdone Apple,

      are the likes of Samsung and the others who do sell the hardware that sell for less than the Apple devices. Android is just a piece of the total experience, but without the device makers, Android would be nothing. And in fact, Android is still not free, and it's not really "open source". Even with what you think is "free", Android devices aren't really that much cheaper than the competition, if at all. The total package price, including device and service plans, aren't that much different for the different platforms.
      • Re: without the device makers, Android would be nothing

        More like, without Android, the device makers would be nothing. They've tried taking popular Android devices and putting a different OS, like Windows Phone, on the same hardware, only to discover it wouldn't sell. So Android is rather key to their present success.

        Are you still futilely trying to insist Android is not available for free, even after I pointed out where you could get it for free? I realize it's hard for a Microsoft fanatic (or have you become an Intel fanatic instead? Hard to keep track) to admit to losing face, but really...
        • Android is not free, and you and everybody else is paying for it,

          one way or another.

          Also, Google is being investigated, as we speak, for intimidation tactics which force the OEMs to not use anything other than Android in their devices. Sure, there are OEMs who do put WP8 in their devices, but that's part of the plan, where the device makers put "just enough" non-Android OSes in their phones, so as not to be charged with anti-trust violations. Try to keep up. Reading is fundamental, and staying informed is even more crucial. Otherwise, you'll keep making the same mistakes which you include in your posts all the time.

          On a related note: If MS gets a license fee from the OEMs who include Android in their devices, and that fee comes to around $10-15, who is paying for it? Google is not. And the OEMs might not. But, when it comes to the final price for the device, you can be sure that, the fee is being collected, either from the cell-plans, or by the OEMs selling them a bit higher to the plan providers. And, when a smartphone is sold without a plan, you can be sure that, if Android is included, it comes with the $15 already reflected in the purchase or retail price.

          It's like corporate taxes. Those taxes are hidden in the total cost of whatever a corporation sells to its consumers. IOW, the corporate taxes, which are considered part of the costs of operation to a business, are passed on to the consumer in the form of higher prices on the products and services which that company sells to a consumer. Likewise with the Android tax, which is Microsoft's take in the form of a license fee to the OEMs. It might not amount to much when compared to the price of a smartphone that costs some $500-800, but, it's still part of the cost of the device.

          Also, Android is just a means for Google to earn advertising income. Part of the data streams which reach a smartphone with Google, is for the advertising. A consumer is paying for that bandwidth, and Google is gaining sales from it. It's not that high a cost when one considers it on a per smartphone basis, but it adds up to many millions, and perhaps billions, in advertising dollars to Google.

          In essence, and like most people with a brain understand, "ain't nothing free".
          • Re: "ain't nothing free"

            How much did you get paid to say that?
  • wow

    that's about how much the big guys at apple got in bonuses this year witch they promptly cashed out .
  • Looks like Apple got their 15 minutes.....

    You have a drop iof something like 40% in the stock price [since the high of over $700.
    You have this bond mess.
    And you have a CEO who has no innovation. Since Jobs death [and even before when everyone knew Cook would take over] Cook has done almost nothing to stop the slide [meanwhile he rakes in million in his salary].
    Jobs never wanted an iPad Mini. Cook comes out with one and the regular iPad sales drop [reminder: larger markup on the regular iPad than the mini].
    MacBook and AirBook sales have also dropped.
    The recent McBooks announced models are so over-priced they should be called Lisa II.