Apple Has a Hit; Pitney Bowes Feels Investor Wrath
Hey, Apple finally has a hit on its hands!
That was the quip one trader made to me about Apple's bond offering, supposed to price tonight, which is already generating orders of roughly $50 billion. Not clear how much they will issue, but if we assume roughly $15 billion, the bid-to-cover would be 3.3 to 1, which is outstanding for a corporate bond.
Anything above $15 billion in issuance would rank among the largest corporate bond offerings of all time.
Biggest Corporate Bond Offerings:
- Roche Holdings: $16.5B (Feb. 2009)
- AbbVie: $14.7B (Nov. 2012)
- Pfizer: $13.5B (March 2009)
- GE Capital: $11B March 2002)
Source: GMP Securities
This has something for everyone: six parts consisting of floating rate and fixed rate bonds maturing in 2016, 2018, 2023, and 2043.
What's it mean for the corporate bond market? Not a lot of tech exposure in the corporate bond market, so that is going to shift allocations.
This is going to create considerable buying from corporate bond ETFs, particularly the largest, the iShares Investment Grade Corporate (LQD), with $23 billion in assets.
Elsewhere: want to know what it means when you cut your dividend in half when everyone wants dividends? Ask Pitney Bowers (PBI), which is getting slammed on massive volume that is five times normal.
PBI missed on the top and bottom line. This is a well-known story: the company, which specializes in mailing-related software and services (postage meters) is in decline because: 1) the volume of mail being sent is in decline, and 2) government austerity.
But the reason the stock is down so much is that it had the second highest dividend yield on the S&P 500(over nine percent). Plenty of people owned it for exactly that reason.
It is also the largest holding in the SPDR S&P Dividend ETF (SDY), the third-largest dividend ETF. There is not huge money in these dividend ETFs, but the top three have combined assets of about $40 billion, so it's nothing to sneeze at.
Cutting the dividend in half will give them about $150 million more per year in capital. They have not said specifically what they will do with the money.
But in one full swoop, their market cap has gone from $3.2 billion to $2.7 billion.
In other words, PBI lost $500 million in a single day, mostly because they announced they wanted to save $150 million in dividend cuts. Yikes!
—By CNBC's Bob Pisani