Apple share buyback program

Apple has announced its intention to buy back $110 billion of its shares, marking the largest buyback in the United States stock market history. 

The leading technology company which has been buying back its shares for the past decade launched the record-making buyback program on Friday while reporting Apple’s fiscal second-quarter earnings. Its second-largest share repurchase was recorded in 2018 when Apple authorized a $100 billion buyback. 

The historic $110 billion buyback indicates the company’s confidence in its future and willingness to return value to shareholders. The move is also seen as a strategic way for Apple to use its cash reserves, which have been growing in recent years.

Industry experts further suggest that Apple’s decision to execute the $110 billion buyback program is a strategic move to boost the company stock price, which has been lagging behind its peers in past months. In other words, the buyback is expected to increase demand for Apple’s stock, which could drive up the price. 

Notably, Apple’s stock price (AAPL.O)  surged by up to 7.9% in after-hours trading. If this increase is maintained on Friday, it would translate to a significant gain of over $190 billion in market capitalization, providing a much-needed boost for Apple investors.

Before the announcement, Apple’s stock had been lagging behind its industry counterparts, posting a 10% loss while the S&P 500 Index rose by 6% over the same period. 

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What is a share buyback?

A share buyback is when a company repurchases or buys back its own shares from the stock market. This reduces the total number of outstanding shares available for public trading. Companies do this by using some of their cash reserves to buy back shares from existing shareholders.

There are a few key reasons why companies undertake share buybacks. One is to boost their earnings per share metric by dividing profits among fewer total shares. Another is to return excess cash to shareholders in a tax-efficient manner compared to paying dividends. 

Share buybacks also consolidate ownership for remaining shareholders. Companies with limited opportunities to reinvest profits productively can use buybacks to prevent cash from sitting idle on their balance sheets. 

According to data revealed in the $110 billion share buyback announcement, Apple is responsible for the top six largest share-repurchase announcements in the U.S., with Chevron Corp. and Alphabet Inc. also making the list. Apple has also raised its quarterly dividend for the twelfth year in a row. 

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