Apple is an offshore junkie

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The FT's reported this morning that:

Apple sold bonds worth $17bn on Tuesday, the world's largest corporate debt sale, as the iPhone maker raised capital to finance a $100bn cash return to shareholders.

Apple, which had no debt before Tuesday's sale, has taken advantage of low interest rates to fund its return of $100bn to shareholders over the next three years.

The cash splurge is designed to appease investors concerned about slowing sales growth and comes a week after Apple reported its first year-over-year drop in net income in almost a decade.

But why would it borrow to return money to shareholders? After all, as the FT also notes:

Apple has $145bn of cash on its balance sheet

So why did it need $17 billion more cash?

The answer is in where the cash is:

$45bn is held in the US

And in what that means;

Repatriating foreign reserves would be costly due to tax implications.

So, as I've long argued, holding cash offshore is not in shareholder's interests: the fact is that a company, like Apple, who has not taken into account the tax cost of holding its cash offshore, can't pay that money to shareholders and has to undertake a programme of borrowing to pay dividends.

Only an offshore junkie, so dedicated to tax avoidance that they have forgotten the true purpose of their enterprise, could end up in such a farcical position.


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