Yesterday, Carl Icahn, the ostentatious billionaire, released an open letter to Apple (AAPL 1.27%) CEO Tim Cook. While the letter was full of praise, it outlined Mr. Icahn's desire for a massive buyback to the tune of $150 billion for Apple.
Carl Icahn believes Apple's current pricing is an "anomaly" and should take advantage of this and the current low-rate environment to provide value to existing shareholders. Carl Icahn even mentions an audacious share price if Apple chose to pursue his strategy.
Apple hasn't responded, but does Carl Icahn have a point here? Apple has a great credit rating and its prior debt issuance was met with voracious demand. Plus, since the cost of debt is lower than Apple's equity costs, it lowers Apple's weighted average cost of capital. However, there are risks associated with taking Carl Icahn's advice.
In this segment of Tech Teardown, Erin Kennedy discusses Carl Icahn's offer to Apple with Jamal Carnette and Evan Niu, CFA.
