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Braeburn Capital

From Wikipedia, the free encyclopedia

Braeburn Capital Inc.
Subsidiary
Industry Asset management
Investment management
Founded October 3, 2005; 12 years ago (2005-10-03) in Reno, Nevada, United States[1]
Headquarters Reno, Nevada, United States
AUM US$268.9 billion (2017)
Parent Apple Inc.
Website braeburncapital.com (Redirects to Apple)

Braeburn Capital Inc. is an asset management company based in Reno, Nevada and a subsidiary of Apple Inc. Its offices are located at 6900 S. McCarran Boulevard in Reno.[2]

YouTube Encyclopedic

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  • How much cash does Apple have?

Transcription

How much cash does Apple have? That is a very interesting question, and different answers are circulating in the press and on the internet. In this video, we will investigate how much cash Apple has by doing a balance sheet analysis of Apple's latest annual report. If you are watching this video, I would like you to actively participate in this analysis by picking one of the following numbers. How much cash does Apple have? Is it A. $8.6 billion? B. $20.5 billion? C. $150.6 billion? D. $237.6 billion? Take your best guess, and let's investigate how each of these numbers fits into the picture! To dive into Apple's numbers, the best place to start is by reviewing its latest annual report. Apple's fiscal year is not equal to the calendar year. From the perspective of Apple's financial reporting, 2016 ended on September 24. The filing document with the SEC for an annual report is called the 10-K. To investigate how much cash Apple has, we need to turn to the balance sheet. This will show you that Apple is not just a maker of gadgets, but in my opinion also a massive hedge fund. The balance sheet is an overview of what a company owns and what a company owes at a point in time. In this case Apple's assets and liabilities at September 24th 2016, which each add up to the very sizeable number of 322 billion dollar. If we go into the detail of what is in those assets and liabilities, you get an overwhelming number of line items. Let me walk you through the big picture to make you more comfortable. On the asset side (on the left), this balance sheet starts at the top with the current assets (things that are already cash or are likely to turn into cash within one year), and then lists lower down the page the non-current assets (things that are not likely to turn into cash within one year). On the liabilities side (on the right), the balance sheet starts with current liabilities (things that need to be settled in cash within one year) and then lists non-current liabilities (mostly long term debt) and shareholder capital. On the top left, one number jumps out: the $20.5 billion in cash and cash equivalents. That's option B from the quiz. However, $20.5 billion is not the only possible answer. $8.6 billion dollar is the true "cash" part of the cash and cash equivalents. The remaining $11.9 billion consists of cash equivalents: highly liquid investments with maturities of three months or less at the date of purchase. So these are the first two options that I showed you in the quiz at the start. Option A $8.6 billion if you approach the question with a very narrow definition of cash, and option B $20.5 billion for the slightly broader definition which includes cash equivalents. In the press and on internet blogs, a much broader definition is often used. Let's call this the cash "big picture". The broad definition of cash is called cash, cash equivalents and marketable securities. It is the sum of three line items: cash and cash equivalents of 20.5, short-term marketable securities of 46.7 and long-term marketable securities of 170.4. 20.5 + 46.7 + 170.4 equals 237.6. This is option D of our quiz: $237.6 billion dollar, an enormous number that in 2016 is double the size of what it was in 2012. What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. They can be marketable equity securities or marketable debt securities. The sum of cash, cash equivalents and marketable securities makes up 74% of the total assets on Apple's balance sheet! The weighted-average interest rate made or earned on cash, cash equivalents and marketable securities was 1.7% in 2016. Apple provides more detail on the asset categories it has invested its $237.6 billion in. The top three is: Corporate securities of $132.4 billion, 56% of the total. US Treasury securities of $42 billion, 18% of the total. Mortgage- and asset-backed securities of $19.3 billion, 8% of the total. Apple states that it primarily invests in highly-rated securities, and that the amount of credit exposure to any single issuer of debt or equity should be limited. 91% of the portfolio is held by foreign subsidiaries. If this money would be brought back to the US, under current tax legislation a substantial amount of taxes would need to be paid upon repatriation, and Apple would rather not pay those taxes but keep the money outside the US. The big unknown that investors, journalists and bloggers would like to have clarified is what specifically the investment portfolio consists of. There are rumours that Apple and other tech giants snap up as much as half of some of the bond issues in the market. Apple is not obligated to disclose an itemized list of its investments, but in the name of transparency I personally would welcome it when Apple volunteers to make this information public. Back to the balance sheet, as we have not seen the full picture yet. We discussed the asset side of the picture extensively, it is now time to turn to the liabilities side. Why would a company that has such a huge amount of cash, cash equivalents and marketable securities, have significant borrowings at the same time? As most of the cash, cash equivalents and marketable securities are held outside the US and Apple does not want to repatriate this money, Apple borrows money in the US to help pay dividends, buy back shares and to fund operations! So while the cash, cash equivalents and marketable securities have grown significantly over the years, borrowings have also grown exponentially to record levels. Taking Apple's borrowings into account gets us to the fourth perspective on the question of how much cash Apple has. If you take the $237.6 billion in cash, cash equivalents and marketable securities, and deduct $8.1 billion in commercial paper and deduct $3.5 billion in short-term debt and deduct $75.4 billion in long-term debt, you get to a "net" position of $150.6 billion. Personally, I think this is the most useful reference point for a discussion on Apple's treasure chest. So who manages this enormous pile of money? Apple's annual report lists its significant subsidiaries. Braeburn Capital, incorporated in the US state of Nevada, is the entity managing the portfolio. Nice wordplay in naming this entity, as Braeburn is an Apple variety. Remember that name! Braeburn Capital, sometimes nicknamed "The World's Biggest Hedge Fund You Have Never Heard Of". It might be in the news in the near future! In summary: there are four ways to answer the question of how much cash Apple has. The narrowest definition is to take only the cash on hand of $8.6 billion. Cash and cash equivalents get you to $20.5 billion. The net amount of cash, cash equivalents, marketable securities minus commercial paper and minus debt get you to $150.6 billion. The broadest definition gets you to $237.6 billion. Now that we know how much cash Apple has, the next question is what should Apple use its cash for? Should it pay more taxes, should it repatriate the cash and pay off its debt, should it embark on acquisitions, or are there other uses of its cash? I would love to hear in the comments below what your opinion is on that question. On the Finance Storyteller YouTube channel, you can find lots of well-researched videos explaining business, finance and accounting topics. Please subscribe to the Finance Storyteller channel, and take the time to like the video and comment below. On average, I post one new video per week. If you subscribe to the channel, you will be the first to see it!

Contents

History

Apple created the company on October 3, 2005[1] to better manage its assets and to avoid certain California state taxes and taxes from other U.S. states totaling in millions of dollars.[3]

Capital

Apple's cash, and short-term and long-term investments
Year Value (billion USD)
2005 8.3
2006 10.1
2007 18.45
2008 24.49
2009 33.99
2010 51.01
2011 81.57
2012 121.25
2013 146.76
2014 155.24
2015 205.67
2016 237.59
2017 268.90

In October 2012, CNET reported that Braeburn had US$117.2 billion under management, making it "the world's biggest hedge fund." [4]

In 2012, Wall Street analysts calculated that Apple could earn up to $45.6 billion in fiscal year 2012, a record for any American business. By national and international diversions of revenues and many other legal methods, Apple stood to save billions of dollars in taxes.[3]

Name

The name Braeburn refers to a particular cultivar of apple. This is a play on the name of the parent company Apple Inc.[5]

References

  1. ^ a b "Apple Takes Its Bankroll to Reno". Bloomberg.com. Bloomberg. 5 April 2006.
  2. ^ "Relax: Apple's Reno asset-management office is still here". Reno Rebirth. 8 March 2013. Retrieved 24 August 2013.
  3. ^ a b Duhigg, Charles; Kocieniewski, David (April 28, 2012). "How Apple Sidesteps Billions in Global Taxes". The New York Times.
  4. ^ "Apple cash manager Braeburn: the 'world's biggest hedge fund'". CNet. October 1, 2012.
  5. ^ University of Massachusetts Cold Spring Orchard page Archived January 12, 2012, at the Wayback Machine.
This page was last edited on 23 August 2018, at 07:39
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