Intel Raises $6 Billion in Bond Sale to Buy Back Stock
1–10 of 23 posts
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#2Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#3Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
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Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#4Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
Swapping debt for equity allows Intel to benefit from the interest tax shields from debt, which raises the enterprise value of the firm, assuming that default risk does not disproportionately rise.
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#5Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
Take it from the point of view of Earnings Per Share (EPS).
The company thinks that reducing the number of shares can be accomplished at a price that is low, and that the interest on the loan to reduce the shares won't lower EPS. The shareholders should be (nominally) happy, because they are getting an earning income stream that is going to be higher in the future.
Now as an aside: Corporations famously mistime buying back shares, and management is usually trying to feather their nest rather than deliver long term value, so they typically make poor decisions on buybacks.
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#6Tax would also be a big reason. Effectively they might have a reduced tax scenario after this buy back
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#7Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
Closing the company and returning money to shareholders (in the most extreme case + bankruptcy so taxpayer pick up the rest)
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#8Could someone explain to a market novice what the rationale would be for this? I thought buybacks were a way of delivering value back to existing shareholders, but why take on debt to do that?
For Intel, debt is currently a less expensive way of capitalizing the company than equity. At 1-4% interest, Intel can borrow money through debt at a very cheap rate, but it is expensive for them to raise money through equity sales since their stock price is relatively low. Swapping debt for equity allows them to borrow money from the cheaper source without having to deplete their cash reserves.
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#9Buybacks usually mean the company thinks their stock is underpriced. However, x86 is currently being disrupted by ARM, and the prognosis does not look good. For example, they've finally got their power consumption to around ARM levels, but the entire mobile industry is based on ARM - ARM is now the incumbent.
Is this Intel hubris, or do they know something we don't?
Re: Intel Raises $6 Billion in Bond Sale to Buy Back Stock
#10Buybacks usually mean the company thinks their stock is underpriced. However, x86 is currently being disrupted by ARM, and the prognosis does not look good. For example, they've finally got their power consumption to around ARM levels, but the entire mobile industry is based on ARM - ARM is now the incumbent. Is this Intel hubris, or do they know something we don't?
It's honestly not clear that the underlying CPU architecture really matters anymore. Smaller customers might care about the technical hassles involved with switching to a new architecture, but smaller customers don't count. The larger customers care much more about per-unit cost savings, and not at all about NRE costs.
In any case there isn't a lot of ARM assembly out there these days, and everything else can retarget x86 with little more than a recompile.