Well, well, well, it seems like Apple is back in the news again! And this time, they’re tapping into the high-grade bond market in the United States to the tune of $5 billion. It’s like the tech giant just can’t stay out of the headlines.
For those who may not know, a high-grade bond is a bond that has a high credit rating. And in this case, Apple is one of the most valuable companies in the world, so it’s no surprise that their bonds would be considered high-grade. But why is Apple turning to the bond market, you ask? Let’s take a closer look.
The first thing to understand is that Apple is sitting on a mountain of cash. And I’m not talking about a little hill or even a big hill. We’re talking about a Mount Everest-sized pile of cash. At last count, Apple’s cash hoard was over $200 billion. That’s a lot of zeros. But here’s the thing, having all that cash on hand isn’t necessarily a good thing.
You see, cash doesn’t earn a lot of interest these days. And with interest rates so low, Apple’s cash isn’t earning as much as it could be. By tapping into the bond market, Apple can borrow money at a low-interest rate and use that money to invest in their business or pay out dividends to shareholders.
Another reason why Apple might be turning to the bond market is that they’re looking to fund their stock buyback program. In case you’re not familiar, a stock buyback is when a company buys back its own stock from the market. By reducing the number of outstanding shares, a stock buyback can boost the value of the remaining shares. And with Apple’s stock price soaring, it’s no wonder they’re looking to buy back some of their own stock.
But why go to the bond market instead of just using their cash reserves? Well, buying back stock can be expensive. And Apple’s cash reserves are better suited for other purposes, like investing in new technologies or acquiring other companies. By issuing bonds, Apple can raise the cash they need for their stock buyback program without depleting their cash reserves.
So, what can we take away from all this? Well, for one, it’s clear that Apple is always looking for ways to put their cash to work. And with interest rates so low, it makes sense for them to turn to the bond market. But at the end of the day, Apple’s financial moves are all about staying ahead of the game and maintaining their position as one of the most valuable companies in the world. And hey, if they can make a few bucks along the way, all the better!