Talk about burying the lede.
Apple announced a 7-for-1 stock split Wednesday, but not until the last sentence of a press release heralding an upsized capital return program to $130 billion and alongside the company’s quarterly earnings report. (For more on Apple’s results, follow Mark Rogowsky’s live blog.)
The split does nothing to change the value of Apple’s shares — 7 shares at $75 apiece are worth the same amount of money as one share at $525 — but could make Apple shares more accessible to individual investors who can’t pony up hundreds of dollars for a single share of stock. That argument loses steam though when considering that retail brokerages like TD Ameritrade often report Apple is among the most widely-traded stocks by clients.
Apple last split its stock in 2005, when the company was a different animal all together and two years before the debut of its most successful product, the iPhone. It wasn’t just the late Steve Jobs who opposed a split either. At the company’s 2012 annual meeting, when shares were not far from where they stand today, Tim Cook dismissed the idea of a split by saying they “do nothing for shareholders,” Bloomberg reported at the time.
The split though is hardly the only thing Apple is doing these days that was anathema during Jobs second reign at the helm. In fact, the capital return increase to $130 billion — up to $90 billion in buybacks and an 8% dividend hike to $3.29 per share that will cost $11 billion per year — marks what amounts to a significant departure from the Jobs era, when the company hoarded cash and investors were content to let them do so with the expectation that it would be put toward innovative new products and massive products.
Unrest has grown in the years since Jobs’ death though. Even though Cook presided over the stock’s rise to its all-time high, Apple has yet to release a product that could be considered anything but evolutionary during his tenure. Pressure on the CEO and his board has also been mounting, with first David Einhorn and then Carl Icahn urging (sometimes none to gently) the company to return more of its capital to shareholders.
Icahn tweeted Wednesday that he’s on board with Apple’s bigger buyback. “Believe we’ll also be happy when we see new products,” he wrote.
Wednesday’s second-quarter results came in ahead of expectations on the bottom line, with profits of $10.2 billion, or $11.62 per share, on $45.6 billion in revenue. That was against Wall Street’s consensus call for earnings of $10.14 per share. Apple sold 43.7 million iPhones during the quarter, which marked a 17% increase from a year ago, but only 16.4 million iPads, 16% fewer than a year ago.
Shares of Apple rallied 7.8% to $565.65 in after-hours trading following the earnings release Wednesday. That would put split-adjusted shares at just over $80 a piece, a level that might be more approachable for the so-called “mom and pop” investor, but could also draw the attention of the index committee that decides the makeup of the price-weighted Dow Jones industrial average. That 30-stock gauge has kept Apple at arms length for years because its lofty price would skew the measure without a change to its formula.