For weeks, investors have been contemplating the effects that debt would have on Apple (NASDAQ:AAPL). The iPhone maker conducted its first bond offering yesterday. Before the size of the deal was finalized, there were reports that the order book reached over $50 billion, showing just how willing investors are to loan Apple their dollars.

The company ended up selling a relatively modest $17 billion in paper at an average rate of 1.85%. I say "relatively" because while that figure set a new record for a non-financial company raising debt, it's but a fraction of what Apple could have done considering the interest the offering garnered. Apple still benefited from investor demand, as the overwhelming interest did provide it with some flexibility while pricing the deal and allowed it to tighten its spread by 5 basis points relative to what it was expecting.

Here are the credit spreads that Apple ended up at.



Spread Over Benchmark

2016 Fixed

2016 Treasury

+20 basis points

2016 Floating

3-month LIBOR

+5 basis points

2018 Fixed

2018 Treasury

+40 basis points

2018 Floating

3-month LIBOR

+25 basis points

2023 Fixed

2023 Treasury

+75 basis points

2043 Fixed

2042 Treasury

+100 basis points

Source: SEC filing.

Theoretically, Apple could have raised close to that $50 billion total. Such an immense deal would have been nothing short of shocking, and in some ways I'd argue that Apple should have done just that.

A numbers game
If Apple sold $50 billion and turned around and immediately repurchased $50 billion worth of its shares, Apple would have reduced its weighted average cost of capital from 8.9% to 8% while reducing its shares outstanding by 12%. That type of move would be immensely accretive to earnings per share.

For example, Apple has about 940 million shares outstanding, which would fall to 827 million if $50 billion were repurchased immediately. Even after adding in the effect of dilutive securities, the weighted average used in the diluted earnings per share calculation would be around 834 million.

Last quarter, Apple posted net income of $9.5 billion, or $10.09 per diluted share. That same net income would have translated into $11.45 per diluted share under the above scenario -- a 13.5% accretion. Equity investors would absolutely appreciate that greater share of profits.

Of course, shares would have skyrocketed if Apple pulled such a shocker, and you don't simply buy $50 billion worth of any company immediately. Still, if Apple had raised much more debt to aggressively repurchase, shareholders wouldn't have complained one bit.