Apple Buys Back Stock Amid COVID-19 Selloff

By Chand Bellur

February 28, 2020 at 3:34 p.m. PDT

  • Fears of a COVID-19 pandemic have investors selling off stock.
  • In the past few days, the stock market has taken an historical plunge.
  • Apple has taken the selloff as an opportunity to repurchase shares, in an effort to boost the stock’s value.

COVID-19 Fears Cause Stocks to Tumble

The coronavirus outbreak, which started on New Years Eve, has now claimed almost 3,000 lives worldwide. Originating near the industrial city of Wuhan, China, the virus has spread worldwide, causing concern of a global pandemic.

What health experts already know about the disease should assuage anxiety, however, corporations providing news have long captivated viewers with fear. Some media critics believe corporations use the news to manipulate stock prices. While there’s not much direct proof, from the outside, this appears to be the case.

More reliable news sources, such as the PBS NewsHour, claim that the disease is no deadlier than most flu strains. For most of the infected, the disease presents as a mild cold with a cough, which eventually goes away. Most people who contract COVID-19 never go to the doctor or hospital. Only the sickest people seek medical attention, which skews the already low mortality rate.

Nonetheless, the combination of obsessive twenty-four hour news, social media and fear have created one of the largest stock selloffs in history. As of today, the market finished off with the worst week since the 2008 financial crisis. This, over a disease that’s no worse than the flu.

Apple Takes Advantage of COVID-19 Fears to Buy Back Stock

Stock prices are tricky, and, if anyone knew how the market really worked, they’d be wealthier than Jeff Bezos. The reality is that the market is a combination of economic fundamentals and psychology. With more people transitioned into 401k’s, today’s investors lack knowledge and are often motivated by fear.

A massive stock market drop is often a huge advantage. It presents a great opportunity to buy stock, for both investors and corporations alike. The savvy investor is holding on to what they have and buying stock at a discount. Chicken Little investors are selling off everything, fearing that the sky is falling.

Apple is not officially capitalizing on COVID-19. Long before the disease spread fear, Apple was buying back stock. This is mainly due to the corporate tax cut, which enabled companies like Apple to repatriate offshore cash holdings. Instead of using this money to expand and hire more employees, Apple and others did exactly what critics said they would do — buy back stock.

Luca Maestri, Apple CFO, has a strategy for buying back Apple stock. The Cupertino company is set to buy back tens of millions of shares at today’s low price. This action, in and of itself, will stabilize Apple’s stock price, creating artificial demand for a stock that few individual investors actually wish to purchase.

The move is great for Apple shareholders and the market in general. Apple is seen as a bellwether stock. If Apple does poorly, they drag the rest of the market down. While stock buy backs seem like tampering with the market, in this case, they could be the catalyst for a rebound.

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