Apple's Week: From Trillion-Dollar Value To The Most Shorted Share In History

Apple had only just made the front-page headlines for becoming the first trillion-dollar company in history when, today -- just a day before its launch event -- it made history for another reason again. This time, the reason will not be celebrated by the company which has now become the most "shorted" stock in history.

Just a day before a rumoured three new iPhones and a new Apple Watch are expected to be announced, city investors are placing the biggest bet in history that it cannot maintain its current share price of around $218 -- triple its value just four years ago.

This shorting accolade was, until very recently, held by Tesla. One can see why. Great tech, but the company is struggling to keep up with the required level of production to turn orders into money. Then we have Elon Musk, who has confused the entire world by tweeting that he had a deal to take the company private, only to then backtrack, possibly earning himself a lawsuit from disgruntled investors.

For the uninitiated, "shorting" is where an investor takes a bet that a share price will fall. He or she will borrow a stock, for a fee, from a stockholder and agree to return that amount of shares at a set date in the future. So if I borrow $100 worth of shares from a friend and sell them, I have $100 in my pocket. If the price halves, I only then need to pay 50 cents for each share to replace the ones I borrowed. Of course, if the price goes up, I would lose money. Anyone who is a fan of the amazing tv series Billions will get the picture and understand the risk.

Shorting is a precarious, nerve-wracking business, and that's why it's interesting to see where the smart guys have placed their bets. The first thing someone not used to financial trading may wonder is why Apple would be so heavily shorted. As discussed, it's not hard to see why people would bet against Tesla, but why take a punt on Apple's share price tripping up so close to the launch of three new iPhones and an Apple Watch.

Well, there are a couple of reasons. The looming trade war with China, which could raise tariffs on electrical goods is a very good starting point. It's a very real threat that has led Apple's appeals to President Trump to proceed with caution to be met with a tweet advising the company starts up production in America. There have been the usual rumours around meeting production quotas, but, trust me -- it's the potential of raised tariffs that investors are looking at here.

Also, any person on the street can figure out the other side of the equation for themselves. There are a lot more Android phones out there. In fact, the vast majority of phones are now Androids and, although those sales are split between multiple companies, it is clear the tide is moving ever-forwards towards an operating system that offers a choice from many phone makers, not just the one.

IPhone sales are plateauing and there is considerable angst among owners, myself included, that their models are slowed down and batteries die quicker, as new versions of iOS are launched and older processors struggle to keep up. It's also fair to say that Apple TV was never the huge splash the company had hoped it would be.

Apple appears to be on a plateau as far as sales are concerned. So why the high share price? Well, there is, of course, the elephant in the room of bringing back $250bn to the US from overseas to be reinvested and paid out to shareholders. I am no whiz on the figures, but Apple's dividend per share saw a healthy increase in August to reflect the new money made available for redistribution.

I'm not city investor, but I would suspect it is this wave of money that has been brought back to the US that has prompted high volumes of trade in Apple shares as people await their slice of repatriated funds.

It means that Apple, for me, has been trading on the past, on the promise of the revenue earned in the heyday of the iPhone finally being dished out to investors. Longer-term, however, once the funds have been distributed Apple's share price has to be due for a revision, doesn't it. For me, the shorters will be proven right on Tesla, they will be proven right on Apple too.

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