Apple has over $ 90B overseas, and there is a dilemma how to bring it back without paying a 35% repatriation tax. This is a big problem for various companies that operates internationally such as biotech companies like Merck etc. Let's pay attention for the moment of Boeing. The bulk of the planes are sold overseas with our Ex-Im Bank guarantee, and yes, we taxpayers are guaranteeing that. What does Boeing with all that money? It need that to build planes in Seattle. Alan Mullay, who is the CEO was passed twice for the top spot in Boeing and has become very successful in getting Ford back to making good money. He knows the answer.
Now back to Apple. It might park the overseas money in Barclays Bank or the largest bank in the world: Deutsche Bank in Germany. Would it be a good idea to use part that $ 90B to accelerate stock buyback when the stock is dirt cheap and place that as treasury stock, and hence boost EPS? I am in that camp. But then how?
Maybe there are ways to do that legally, and only tax lawyers can give the answer, or the IRS can issue its opinion. Here is one possible way:
Apple can ask that foreign bank to sell put options (this method is used by Qualcomm), and if executed you buy Apple at a discount, and it expire worthless, more money in the bank. If Apple want to direct purchase, ask that foreign bank trade dept to buy Apple stocks with the Apple's cash in that bank. That will reduce the float of Apple shares.
Here is the question:
You cannot repatriate your profit overseas tax free (the tax holiday has passed some years ago). But can you bring back tangible items bought overseas instead? There is no import duty for bringing back shares.
Or you can just keep that Apple shares under the custody of Deutsche Bank, and will that constitute treasury stocks? |
