Apple’s Secret $8.5 Billion Plan
Something very fishy happened this week.
On Monday Apple Inc. (AAPL) borrowed $8.5 billion by issuing a series of new bonds. (Source:Marketwatch)
This kind of financial move might make sense for a lot of companies. After all, the coronavirus crisis has made it difficult for some companies to manage cash flow and cover their day-to-day expenses.
But not Apple…
At the end of last quarter, the company reported a whopping $190 billion in cash. That’s plenty big enough to allow AAPL to cover its expenses for years — even if sales slow because of coronavirus!
So why would Apple add $8.5 billion of debt to its balance sheet?
I’ve got my hunches… And today I want to explain how Apple’s $8.5 billion could wind up giving you a profit when that money gets spent.
A Suspicious Transaction With Big Implications
Apple’s capital raise doesn’t make a lot of sense if you think about the company’s current business.
As I mentioned, Apple is currently sitting on a war chest of about $190 billion. And for the last few years, Apple has been generating anywhere from $9 billion to $28 billion in extra cash every quarter.
Officially, Apple claims that the additional $8.5 billion will be used for “general corporate purposes” such as dividends, paying back other debt, repurchasing shares of stock and working capital.
But given the company’s huge cash balance, and tens of billions in new cash generated every year, Apple won’t have any trouble with funding its “general corporate purposes” for years and years to come.
No, this extra cash isn’t the garden variety “keeping our financial house in order” bond issuance.
This is part of a larger plan. A plan that requires billions in extra cash. And a plan that will ultimately leverage Apple’s strong financial position in a season when many other companies are struggling to stay competitive.
So what exactly will this extra cash be used for?
My educated guess is that Apple is building a cash horde to finance a major buyout transaction.
And frankly, with nearly $200 billion in total cash, Apple could be planning for a series of buyouts helping the company expand its business into new areas.
Why a Buyout for Apple Makes Sense
The famous financier Nathan Rothschild is quoted as saying, “You should buy to the sound of cannons, and sell to the sound of trumpets.”
In other words, the best time to invest is when danger is apparent, fear dominates the market, and prices are exceptionally low.
At the same time, it makes sense to sell your investments when everyone is confident and prices are high. Unfortunately, that’s just the opposite of what most traditional investors do.
Apple is apparently taking Rothschild’s advice to heart, and raising cash to buy out an entire company (or several companies).
This could make a lot of sense for the future of Apple’s business.
A buyout of a major manufacturing plant would allow Apple to have more control over creating and scaling devices. Especially in this environment of escalating political tensions with China.
A buyout of a major software company would let Apple tap into a talent pool of highly educated programmers. This could allow Apple to get more creative with its operating systems and services it offers customers.
Apple could even buy out a media firm (to get more content for its streaming services), an auto manufacturer (would you be interested in test driving the iCar?), or a number of other companies that would allow Apple to leverage its enviable name brand into new products or services.
And thanks to the coronavirus crisis, many of these buyout targets are now trading at a discount to where they were just a couple of months ago.
This gives Apple an opportunity to pull the trigger on a buyout opportunity, while spending less than it would have had to offer to negotiate a buyout a short time ago.
Yes, Apple’s $8.5 billion dollar capital raise is strange when you look at the company’s current business. But when you think about what Apple could be planning to do with this extra cash, it starts to make more sense.
How Investors Profit From Buyout Transactions
So if we’re confident that Apple is on the hunt for a buyout, how should we invest to profit from this situation?
Many of Wall Street’s advisers are telling clients to buy shares of Apple Inc..
After all, the company should only invest in an opportunity that will help profits grow over time. And negotiating a buyout when prices are low should make the transaction even more profitable over time.
You probably know that I’m a fan of Apple. I’ve recommended the stock for years and my readers have grown their wealth and generated income from AAPL’s dividend.
But on top of owning shares of AAPL, there’s an even better way of profiting from a potential buyout.
You see, when a buyout occurs, the details are typically hashed out behind closed doors. All negotiations are supposed to be kept a secret until an agreement is reached and an announcement is made.
Once that announcement hits the newswires, the stock of the company being bought out typically rises overnight.
This is because in order for a company to agree to be bought out, Apple typically has to offer much more than what the stock is currently trading for. And once investors see that Apple is paying a 20% premium, 40% premium, or sometimes even a triple-digit increase to where the stock is currently trading, shares spike higher!
The good news is that if you own the stock before a deal is announced, you’ll wake up to a giant profit once the news hits Wall Street.
The bad news is that if you wait until after a buyout deal is announced, you’ll miss out on the gains because the stock will shoot higher before you get a chance to act on the buyout news.
It takes a lot of research and hard work to predict which company (or companies) Apple may be targeting with its huge stash of cash.
But my team and I are hard at work figuring out which companies stand the best chance of getting bought out — and generating those huge overnight profits.
I’ll keep you posted on what we dig up!
Here’s to growing and protecting your wealth!
P.S. Our team recently earmarked millions to get our hands on a special indicator that helps identify companies BEFORE they’re bought out. I call it the One Day Bonus Indicator, and it has been responsible for helping my readers lock in profits of 135%, 163% and even 217% (just to name a few).
If you would like to see how we’re using stocks that are potential buyout candidates to lock in these tremendous profits, you should check out the link below. You’ll see all the proof for yourself, and see if a tool like this is right for you…