Citi lists Netflix, Tesla as potential takeover targets for Apple

Re:Citi lists Netflix, Tesla as potential takeover targets f... by Joeri on Friday May 05, 2017 @12:44PM (#14274793)

There's no magic trick I know to borrow indefinitely at a low accumulated interest rate. If they borrow money with the overseas cash as collateral, how do they repay it? If they do it by borrowing more money, they need to cover the initial debt + the interest. That way the interest cumulates, and eventually the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation.

Let me also ask: what am I missing?

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Re:Citi lists Netflix, Tesla as potential takeover targets f... by runako on Friday May 05, 2017 @01:58PM (#14275437)

> how do they repay it?

Out of cash flow in the US. The companies in question have no problem generating cash in all their markets.

> the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation

See a post down thread about this, but I'm assuming the offshore cash is held in e.g. Treasuries earning ~2%+/-, or roughly 100 basis points below where they can issue debt.

This math also neglects the fact that the interest on the debt reduces US tax liability, plus any sweeteners other jurisdictions may offer for keeping piles of cash stored there. Depending on where the cash is stored, it also may be subject to lower tax rates on earned interest than it would be in the US after repatriation.

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