“Bond King” Bill Gross, co-chief investment officer of PIMCO, butted heads on Thursday with billionaire investor Carl Icahn, telling Icahn to leave Apple Inc alone after he again urged the iPhone maker to initiate a tender offer to buy back US$150 billion of its shares.
Meanwhile, Icahn revealed in a letter to Apple chief executive Tim Cook, made public on Thursday, that he had increased his stake by about 22 percent to just over 4.7 million shares since dining privately with Cook last month — underscoring his belief that the stock is undervalued.
TESTING THE WATERS
Later on Thursday, he told CNBC that he is considering a proxy fight with Apple if the company rejects his proposal, which calls for the company to purchase the shares at US$525 each.
He added that he does not personally want a seat on Apple’s board at this time.
Apple’s shares ended regular trading on Thursday at US$531.91, up 1.3 percent.
The activist investor, one of the best known managers in the US$2.25 trillion hedge fund industry, said he would “test the waters” with other shareholders and “judge at that time” whether to pursue a proxy battle.
Icahn’s demand for the US$150 billion buyback, repeated several times publicly and privately to Apple’s Cook since August, spurred a caustic Twitter comment from Gross: “Icahn should leave Apple alone & spend more time like Bill Gates. If Icahn’s so smart, use it to help people not yourself.”
In response, Icahn told CNBC that Gross is entitled to his own opinion.
Colin Gillis, technology analyst at BGC Financial, said Apple does have significant, unused cash that should be spent either on operations and investment or returned to shareholders.
“If you can’t find a reason to deploy it then return it,” he added.
Apple declined to comment.
In a public letter dated on Wednesday, but published on Icahn’s new investor-focused Web site on Thursday, the famously outspoken activist repeated calls for deep-pocketed Apple to use surplus cash to buy back shares.
He said a US$150 billion move could ratchet shares to an all-time high of US$1,250 over three years.
“Irrational undervaluation as dramatic as this is often a short-term anomaly. The timing for a larger buyback is still ripe, but the opportunity will not last forever,” Icahn said in his letter.
“While the board’s actions to date ... may seem like a large buyback, it is simply not large enough given that Apple currently holds $147 billion of cash on its balance sheet, and that it will generate $51 billion” of earnings before interest and taxes, based on Wall Street estimates, he wrote.
Analysts have said Icahn’s newfound interest in Apple is helping improve sentiment on the stock. Icahn had argued as early as August that it could be worth US$700 with a larger stock buyback program.