Investors hunger after Apple

Apple’s snap $2 billion bond raising in the Australian market last week is a stark reminder that our investment markets are too shallow.

Too many big resource companies, too many big banks, two big retail/supermarkets, one biggish airline, a couple of international medical types, some insurers and plus one big Telco – Telstra. Where are the companies that are going to set the standard for Australia in the 21^st century in hi-tech, biotech, international food suppliers etc?

While we dither about with government reviews that talk about doing something that will help industry onto the international stage, most of our major players are falling into the hands of foreign predators. And with our currency now sinking back to levels of a decade ago I can only surmise that this trend will continue.

Our markets need to be broader not only for the good of Australia’s future growth but also to help investors diversify their portfolios without having to hedge against currency moves on foreign markets.

Apple Inc showed the way this week by attracting more than $2 billion of orders from fixed-income fund managers within hours of issue. The Californian-based tech giant formally launched a two-part bond issue on Thursday morning of four- and seven-year bonds and basically sold it firm on the phone though a series of conference calls. The order book reached $1 billion quickly and then doubled to more than $2 billion as investors clamored for bonds of the AA+ global technology firm.

These bonds are known as “Kangaroo” bonds and if the final deal value exceeds $1 billion, it will be the largest sale of bonds by a non-financial corporation in the Australian market to date. It didn’t hurt that the Apple’s bonds were being marketed at a indicative price of 0.70 percentage points over the bank rate for the four-year bonds (a yield of around 3 per cent, and 1.15 percentage points over the swap rate for the seven-year bonds – yielding 4 per cent.

The pricing appears conservative but it allowed fund managers access to Apple’s AA+ credit rating which is higher than any of the alternatives in the Australian market except for the AAA credit rating of the Australian government.

Apple, which was carrying a market capitalisation earlier this in excess of $US700 billion, said proceeds were intended for “general corporate purposes” including share buy-backs, dividend payments and to fund working capital, capital expenditure, acquisitions and debt repayments.

While on the subject of Apple it was fascinating to see its response recently to the lack of gender diversity in the US hitch industry, particularly in California’s Silicon Valley where Apple is building a new mega corporate headquarters and research facility.

Apple went on the front foot and announced it had hired over 11,000 women globally in the past year – 65 per cent more than the previous year – to boost employee diversity.

Chief executive Tim Cook said there was “a lot” more work to be done because as of September 2014 Apple employed 92,600 people full-time.

Competitor Google revealed in June that 21 per cent of its tech hires last year were women, boosting the overall number of women in technical roles by 1 per cent, as part of efforts to increase diversity.

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