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The Icahn Effect: Billionaire Investor Builds Up Large Stake in Apple

Billionaire Carl Icahn made waves throughout the investment community when he announced he was taking a large investment position in Apple Inc. The savvy investor had taken to Twitter earlier in the week to say something was coming down the pike. Wall Street had been watching Icahn closely when he took to Twitter to announce the $1 billion investment. “We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come,” said Icahn. He followed up with another tweet saying, “Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.”

With that tweet, Apple’s stock rose almost 5% higher at one point during the trading day. Icahn’s proposed plan for Apple is to use their debt to perform a $150 billion stock buyback. Although such a large amount of debt is unusual for tech companies, a move that large could send the stock to roughly $625.

Whether or not a buyback is the right strategy, Apple needs a plan of action. As reported by washingtonpost.com:

“Shares of Apple have fallen more than 30 percent from a September high of $705.05, with many investors questioning whether the company can maintain the innovation pace set by its late co-founder Steve Jobs. On Tuesday morning, for example, Oracle chief executive Larry Ellison said that he thinks Jobs is ‘irreplaceable‘ and predicted Apple would have a rough time staying ahead of the curve without him.”

The Icahn announcement came at the right time for Apple investors, as the company’s stock had already started to make progress in key levels. The announcement only made things better. Also reported by forbes.com:

“Apple shares have reclaimed their 50- and 200-day moving averages in the past three weeks.  This is positive, but the stock faces heavy resistance in the zone of $510 to $530.

“The stock ran up to $494.66 before giving up some of the gains and closing at $489.57, up $22.21 for the day.”

 

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