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How to invest in Apple: complete guide to buying AAPL shares

Karen Haslam | June 3, 2013
Everything you need to know about buying AAPL shares, and whether you should.

Speaking of the amount of money Apple has in the bank, tempers are raging over this. Earlier this year a 'rogue' fund manager caused quite a stir when he claimed that Apple was trying to stop shareholder having a say in what it did with its money. As a result the company eventually agreed to return more of its $144.7 billion cash horde to investors. Doing so is no easy process because a lot of that cash is tied up overseas and the company will have to pay corporation tax if it returns it to the US (Apple's been in quite a lot of trouble recently over its tax practices). To avoid tax on this occasion Apple is offering new investors the chance to lend it money so that it can pay current investors back (at least that's one way of looking at it). Suffice to say Apple is getting a better rate of interest on this debt than it would have to pay the US government in tax.

This is the sort of news that should please investors, and since the bond sale at the end of April the company's share price has been on the rise.

However, it did fall back on the 15 May. Why would that be? This story is a good example of why it's the big fund managers who really control Apple's stock. There have been lots of examples of aggressive trading over the past few months but in this case it appears that short-sellers had swarmed AAPL.

This "swarming" was identified Canadian money manager and financial columnist Mal Spooner. He first noticed that short interest in Apple had swelled from 8 million shares in April 2012 to 20 million in April 2013 and likened this burst of short selling to a "swarming," a street crime where "an unsuspecting innocent bystander is attacked by several culprits at once."

Spooner highlighted that short interest in Apple also peaked between 15 April and 30 April this year, to a record 41.6 million shares. During that fortnight - on 19 April (two trading days before Apple's second quarter financial report) Apple's share price hit its lowest price in 16 months ($385.10). Those investors then made off with their gains because by 15 May (there's that date), Apple's short interest had fallen to 26 million shares. More here on Fortune.

Spooner explains: "The irony is that short-sellers borrow the stock from real shareholders (via third parties) in order to sell it on the market. After the selling pressure wreaks havoc on the stock price, the short-seller then buys shares at a much lower price, returns the 'borrowed' shares to those real shareholders and keeps the profits."

 

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