The scam: Apple’s $1 trillion fraud


Today's Best Tech Deals

Picked by Macworld's Editors

Top Deals On Great Products

Picked by Techconnect's Editors

Turns out Apple isn’t a successful company after all! Surprise! Yep, it’s just a giant scam. Well, at least we know now. Before it got out of hand. Anyway, this will be The Macalope’s last column since the whole house of cards is tumbling down around us.

Writing for The New Republic, Alex Shepard tells us of “Apple’s Stock Market Scam.” (Tip o’ the antlers to a reader in Dallas.)

Turns out it’s stock buybacks which are the only reason Apple made it to a $1 trillion valuation. And you thought it was the iPhone X. Ha-ha! Oh, Wallace. Will you ever learn? And will you ever stop wearing those ridiculous suspenders?! Ha-ha! You look like some sort of disco-dancing farmer.

The Macalope would watch that show.

Hey, guess what other company has also done buybacks? Well, a lot of companies, actually, but one of them is Amazon, the company that practically everyone was crowing would beat Apple to $1 trillion, although it hasn’t done them as recently as Apple has. The point is, though, a buyback is not a “scam.” Maybe it’s not a great practice for society, but that’s not the same thing as a “scam.” Although, it sure does seem that a lot of society’s ills are only brought up when they can be tied to something Apple does.

Apple beat Amazon and Google in the race to become the first trillion-dollar company in the U.S. on Thursday afternoon…

And pundits are falling over each other to try to dismiss it. Hey, the horny one would just as soon ignore it because it’s kind of a dumb thing to get worked up over. So why is he arguing about it? His contention is that the $1 trillion valuation hubbub is dumb because you don’t need a round number to know that Apple is a successful company. The contention of a lot of pundits, however, seems to be that it’s dumb and Apple is dumb and it’s also not really that successful when you look at it in this weird way in which no one ever looks at any other company.

…Apple’s recent success on Wall Street isn’t due to its technological innovations or its sleek products.

Shepard complains that Apple’s buyback program has unnaturally inflated the value of the company by reducing the number of shares available which increases the price.

…as The Motley Fool explains, “In the near term, the stock price may rise because shareholders know that a buyback will immediately boost earnings per share.”

Arguing that Apple’s PE ratio is unnaturally high is a little weird when Apple’s PE ratio is 18.98 while Amazon’s is 150.54. You’re entitled to believe that Amazon’s business is eight times as secure as Apple’s. You’re also entitled to believe NASA never landed men on the moon. That doesn’t make you less of a whack-a-doodle.

…buybacks may not be a particularly efficient way to prop up a share price. Earlier this month, The Wall Street Journal found that “57% of the more than 350 companies in the S&P 500 that bought back shares so far this year are trailing the index’s 3.2% increase.” (Apple’s stock, however was an exception—its shares had jumped 11 percent at the time of the report.)

Buybacks are bad because they increase value for Apple and no one else. And none of this has anything to do with the fact that Apple is the only smartphone manufacturer to figure out how to squeeze more revenue out of the segment while sales are essentially flat. Perish the thought.

Apple has increased its research and development spending over the past year, but the company is still only spending about five percent of total sales, a relatively low number, especially given the fierce competition between Apple, Amazon, Facebook, Google, and Microsoft.

Apple doesn’t spend enough on R&D! Yeah, it’s never spent much on R&D. And somehow it’s still here. Weird. The perpetual misunderstandings will continue until… uh, there are congressional hearings about this big Apple “scam” or something.

Anyway, The Macalope was just kidding about this being his last column. He can’t quit now. We still have so many more Apple “scams” to uncover.

Note: When you purchase something after clicking links in our articles, we may earn a small commission. Read our affiliate link policy for more details.
Shop Tech Products at Amazon