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

In '97, Bill Gates helped his old frenemy, Steve Jobs, by purchasing $150M of AAPL stocks. Here are my questions about this transactions.
1. Why couldn't AAPL allow the general public to buy $150M worth of
non-voting shares, but instead he went to only one entity - MSFT - for this financial lifeline? This is pricing discrimination, because our price is $INFINITY and MSFT's price was $150M. 2. When MSFT bought $150M worth of AAPL shares in '97, did they buy from the secondary market or did they buy from a new offering? These shares were non-voting anyways. 3. Why didn't AAPL issue$150M worth of high-yielding bonds to MSFT? This would have had more stability, paid a higher-than-normal yield, would have been tax favorable to AAPL, and they are also a non-voting investment in MSFT. 4. Finally, how does a company "issue shares towards prosperity"? This dilutes EPS and just doesn't make sense to me. This is what doesn't make sense specifically: If a distressed company issues $100M of shares, then that distressed company's new business model is to simply issue shares and some C-level executives (i.e. CEO, COO, etc.) and i- Bankers get rich. But the new shareholders lose value over time. Their investment in a distressed company is bad. How do you issue your way to prosperity? 5. What effect would it have had if MSFT bought $150M worth of stocks in the secondary market (from the NYSE or NASDAQ exchange)?
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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?
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Lubow,
This was quite helpful. You're quite astute at corporate finance. I have 3 questions, which is down from the 5 that I originally had.

But for a company like AAPL at that time, Larry Ellison (ORCL) was offering to do a hostile takeover with Steve. Also, AAPL doesn't need marketers to sell this investment. Probably what you meant is that the i-banking fees, attorney fees, etc. are way too high, and this made sense time-wise and financially-wise.

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.
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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.
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Lubow wrote

It doesnt come from treasury stock.

It doesnt necessarily come from treasury stock.

That doesnt necessarily come from treasury stock either.

They are more than just that too. http://en.wikipedia.org/wiki/Treasury_stock

Thats about the only thing you did get right.
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wrote

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.
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Lubow wrote

They are the RESULT of the split, stupid.

Wrong, as always.

Which aint treasury stock, stupid.

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

Just another of your pathetic little drug crazed fantasys, child.
Everyone can see for themselves that you did nothing of the sort.
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And you'll never understand them if you read the demented droolings of "Dumb Mikey Lubow" Tenenbaum...
I mean, he's posted some really stupid crap before, but there's stuff in this thread where he outdoes himself with gob-smacking cluelessness on the basics of the stock market and corporate finance...

Oh Lord, don't get too proud of yourself "God Peed", you just bested a certifiable retard...
An actual SPLIT is little more than an addendum to the articles of incorporation where the number of authorized shares is increased without changing the equity value of the shares, and that ALL the current holders of the existing shares are deemed to hold that percentage increased number of shares.
For example, if the company originally registered 8million shares, if they have a 2for1 split, they will then have 16million shares, and a holder of 100 shares will be deemed to have 200 shares, worth in total exactly what the 100 shares were worth (the price per share is halved). Over time, the additional stock certificates are delivered by the transfer agent for the company to the holders.
The only possible confusion on this simple issue is that sometimes a company will do something that is misleadingly called a "split dividend", where they send a dividend to existing shareholders in the form of previously authorized and registered stock...like for example, for a 5% "split dividend", they would send five shares to a holder of a hundred shares...but that's really a different thing than an actual SPLIT...

Well, he's not always wrong, but in those cases he's just lying, which of course, is just another way to be wrong, only intentionally...

Come on, "Scrod Weed", this is getting like beating up a mongoloid...it's making you look like a dumb bully, you don't want to get THAT reputation, do you?

It might...isn't that why they are always begging for money on Wikipedia? They're worse than friggin' PBS...

He's 68 years old! He's only five years younger than you, more like an idiot step-brother than a child...

Isn't this what you usually say when you're wrong? Just call him "pig ignorant" and call it a day...
--
William Ernest Reid (aren't the people who write the Wikipedia
entries the same people who post to Usenet?)
  Click to see the full signature.
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wrote:

BWHAHAHAHAHAHAHAHAHAHAHAHA!!!!!
Well, she should be...in addition to the kitchen table job-shop Sharon Tenenbaum runs (Strategic Technologies Inc. BWHAHAHA!!!), she also runs other companies in her own deranged mind that are actually owned and run by other people, who called the cops on her for identity theft...

If you haven't noticed yet, "Dumb Mikey Lubow" Sharon Tenenbaum didn't know what she was talking about...she and "Nod Deed" are just playing the Tweedle-Dum and Tweedle-Dummer game here, making stuff up as they go along, any of which is only correct by mere random chance...
--
William Ernest Reid (you may not be able to learn anything about
corporate finance here, but it's a daily HILARIOUS lesson in the
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2.7182818284590... wrote on 2/23/12 3:48 PM:

Does your teacher know that you are using M.I.S. to do your homework???
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amazing
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2.7182818284590... wrote:

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.

New stock.

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.
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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.
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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.
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2.7182818284590... wrote

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.
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