November 20, 2013 | In: Opinion, Technology

What Happens if Apple Becomes a Private Company?

Apple has been a public company since 1980, back then the stock price was $4.00. It is currently trading around the $518 mark, which means that in 33 years, the stock went up by 12,950%, which means that if you were crazy enough to invest $100,000 in AAPL back in 1980, you would be a happy camper right now with nearly $13 million. But most likely you didn’t, and if, you were one of those 0.00001% investors who actually did that, then probably you got rid of your AAPL stocks in 1985, when they were trading for 60% less than the original $4 you paid for each share. However, you might be one of those very lucky investors who held on to the stock until now, and you might already have the $13 million, but if that’s the case, you wouldn’t be reading this blog, would you? You would probably be buying a luxury yacht or jumping from summer to summer to summer to reach a perfect tan. And guess what, it might get even better for you.

Carl Icahn, a famous and heavyweight investor, with huge shares in Apple, is asking Apple to buy back nearly 1/3 of its stocks, which means the supply will be suddenly short on demand, which means that AAPL’s stock price would shoot high in the sky – I’m talking about at least a 30% increase here. Now, the point of this post is not to discuss what will happen if Apple goes the Icahn way (that’ll be the topic of another post), but what would happen if Apple’s board goes crazy and decides to buy back all the stock, and make Apple a private company.

Well, for starters, you, as an investor, will make a huge profit, because Apple will be forced to offer a high markup over the current stock price to satisfy all investors – typically that markup is 20% to 30%.

As for Apple the company, it will start collapsing, here’s why:

There are many people buying Apple products at the moment because they have AAPL shares and they want to contribute in lifting the prices of these shares (or at least preventing them from falling). Once all of these people are stripped away from their Apple shares, then buying Apple products will be no longer a concern for them. They will start looking at other brands, Samsung, Sony, whatever… Once they do that, then Apple will start to feel the reduced cash flow, which will affect the quality of its products, which will further reduce the number of Apple adopters. Once that happens, Apple will be forced to reduce its profit margin to a point where the company will start carrying debt. Not good!

The cycle above will become vicious and more destructive with time, and the end result will be seeing Apple as a passé company, that once ruled the technology world.

So, should Apple become a private company or not?

I think they should, mainly because they’re currently dying slowly anyway – they haven’t had any decent product for years and they have consistently missed expectation for the past several quarters. Apple post Steve Jobs is just no longer Apple.

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