Oct 09, 2014 10:27 AM EDT
Investor Icahn Urges Apple to Repurchase More Company Shares

Activist investor Carl Icahn published an open letter to Apple CEO Tim Cook this week, saying that he thinks shares of the company are "dramatically undervalued," presenting it with a chance to buy back more of its own shares at a discount through a tender offer.

Icahn's new note, called "Sale: Apple Shares at Half Price," was published to his website Shareholders' Square Table. Icahn believes that shares of APPL stock are trading at half of their actual value.

His forecasted growth for fiscal year 2016 and 2017, along with net cash, values Apple's stock at $203 per share today.

Apple had $133 billion in net cash, which Icahn called an "excessive liquidity." Icahn believes Cook should ask the Apple Board of Directors to "accelerate and increase the magnitude of share repurchases" through a tender offer.

"We commit to this because we believe Apple remains dramatically undervalued," Icahn wrote. "And we think you and the Board agree. If you did not, you would not continue to repurchase shares under the existing authorization. You have said before that the company likes to be "opportunistic" when repurchasing shares and we appreciate that. With this letter we simply hope to express to you that now is a very opportunistic time to do so."

Icahn goes into detail about how he believes the iPhone will continue to hold "significant premium market share," and that Apple's high retention should be enough to keep customers coming back.

He also has hopes for future products and services, like the Apple Watch and Apple Pay.

"These new launches will further distance Apple's ecosystem from its peers and accelerate revenue and earnings growth in excess of the status quo," he said.

The investor, who owns about 53 million Apple shares, has in the past pressured the company to increase its stock buyback program.

"To preemptively diffuse any cynical criticism that you may encounter with respect to our request ... we hereby commit not to tender any of our shares if the company consummates any form of a tender offer at any price," Icahn wrote.

Apple shares increased by 1 percent at $101.78 in premarket trading on Thursday. 

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