Questions about MSFT buying $150M of AAPL in '97

Do you have any idea what it costs to market $150MM of securities to the general public? Not only that but the transaction was for preferred stock. At the time, did you think there was a market for preferred AAPL? I don't think so.

The board just cannot create shares out of thin air. They first need authorization from the stockholders. Most likely, the MSFT preferreds were treasury stock that was created when AAPL went public. Does that answer your question?

Ask Bill Gates why he settled for preferred stock. One reason may be the preferreds were already in the AAPL treasury. Another reason may be that Bill just did not want to give Steve a hard time as it was a symbiotic relationship in that they needed each other. Steve needed Bill's dough and Bill needed Steve's platform.

Nobody got diluted (sort-of). It was preferred stock. It did not affect shares outstanding for P/E calculations although earnings get diminished by the amount of preferred divs.

Are you serious? Do yourself a favor and just stop and think, why did MSFT buy the preferreds?

Does your teacher know that you are using M.I.S. to do your homework???

He was never really an enemy. Jobs had purchased Office for the Mac right from the start etc.

Basically the general public wouldnt have been interfested at that time.

Nope. It was actually much lower than Gates was prepared to pay.

Because stock doesnt have a certainty of dividends attached to them.

The dividend can be varied as the financial circumstances of the company requires.

Some like Digital chose to never pay a dividend at all, ever.

Nope, because it would require the interest to be paid even when the company wasnt doing that well financially.

And that was not the case with that non voting stock that Gates got.

But not as good financially for Apple.

Nope.

Obviously when they need more money to become prosperous.

Yes.

Then its just as well you dont get to run any corporate.

Not if the company cant turn that $100M into a useful result they dont.

They actually get to watch their share price slump from what they paid for them instead.

No they dont if the company does something useful with that $100M they have raised and that stops the company going down the tubes financially.

That was at a time when Apple kept losing market share and there was come real doubt if they would manage to survive. Commodore didnt.

It clearly wasnt.

By using that $100M to fix what is wrong with the company and returning it to prosperity.

Apple wouldnt have got that $150M, whoever owned that stock would have instead.

Hello Rod,

Thanks for your insights. Here are my rebuttals to your answers - some of which contradicts Lubow.

Ahhh haah!!! This is where you and Lubow are contradicting each other. He (she?) stated that it was treasury stocks.

Ohhh...so this was beneficial to Steve Jobs' Apple. Brilliant. He shifted the risk over to Microsoft.

Here is my biggest question. My question pertains to treasury shares. I suppose that I never understood treasury shares that well. It sounds like if Jobs tried to sell these treasury shares to the public, it would have been not successful at all. Moreover, it would have been too time-consuming and perhaps expensive.

Regarding treasury stocks: What incentive does a corporation have to KEEP their treasury stocks? This would imply that they would retain more of their earnings. That's what it means to me. The corporation AAPL in Cupertino owns more of Apple Company that anyone else in the world if they had 55% of their total shares as treasury shares.

=================== Why keep treasury stock?

Where in hell do you think the additional stock for splits comes from?

Where do you think the stock that backs up the executives' options comes from?

For utilities and other dividend payers, treasury stock can be used as a cheap way to sell shares in the company's DRIP. And, of course, as you had mentioned, there are always secondary offerings in an attempt to get "money for just the cost of marketing and registration" without having to repay it.

You need to understand that treasury stock is not the same as shares outstanding. From shares outstanding we derive the P/E ratio, book value, price-to-sales and the the stock indeces. Treasury stock is simply shares that have been authorized by the stockholders but have not been issued. Treasury shares are NOT voting shares.

Good grief!! "New stock" IS treasury stock that was issued in the MSFT transaction. After it was issued it was no longer treasury and became "preferred shares outstanding" unless AAPL buys it back from MSFT in which case it becomes treasury stock again. Get with it, dood.

No evidence to support that later claim.

Its rather more complicated than that, that was as a result of the lawsuit they both decided to give up on.

Lubow wrote

It doesnt come from treasury stock.

It doesnt necessarily come from treasury stock.

way to sell shares in the company's

That doesnt necessarily come from treasury stock either.

an attempt to get "money for just the

They are more than just that too.

Thats about the only thing you did get right.

Ok, Einstein, where does the additional shares for a split come from?

It's ALWAYS treasury stock because it's either unissued stock or stock purchased on the open market which AUTOMATICALLY becomes treasury stock and not counted for shares outstanding until it is actually issued at the strike price.

Isn't that what "...can be used as a cheap way..." means?

If you were knowledgeable in the English language and passed high school eco you would have seen I got it ALL right.

Lubow wrote

They are the RESULT of the split, stupid.

Wrong, as always.

Which aint treasury stock, stupid.

the strike price.

cheap way to sell shares in the company's

Nope.

Why did you ignore that ? It aint going to go away.

you would have seen I got it ALL right.

Just another of your pathetic little drug crazed fantasys, child.

Everyone can see for themselves that you did nothing of the sort.

amazing