Apple Falls on Concern Trump Tribulations May Stymie Tax Reform

(Bloomberg) -- Apple Inc. fell the most in six months as controversy surrounding President Donald Trump’s administration prompted investor concern about the likelihood of tax reforms being passed.

Apple has $240 billion in cash and equivalents outside the U.S., about 93 percent of its total reserves, and Trump has proposed a tax cut to repatriate offshore holdings. The stock fell as much as 3.5 percent, the most since November, to $150, while the S&P 500 fell as much as 1.4 percent.

“The progress of legislation, particularly taxation reform, may not be as smooth as people expect,” said Colin Gillis, a New York-based BGC Partners analyst with a hold rating on Apple stock. “Apple has the most to gain on foreign cash repatriation.”

Through Tuesday, Apple stock had jumped 34 percent this year on anticipation for the next iPhone and the expectation that Chief Executive Officer Tim Cook could use repatriated offshore cash to extend shareholder returns with higher buybacks and dividends.

For now, cash held offshore is subject to a 35 percent tax when brought back to the U.S., and the Trump administration has proposed a cut to that percentage. Trump plans to reduce that to as low as 10 percent, people familiar with his tax plans said last month.

The president has faced a series of allegations over the past week concerning his handling of the dismissal of FBI Director James Comey, under whose leadership the agency was investigating alleged ties between Trump’s associates and the Russian government. The latest crisis has prompted some analysts to consider what market valuations should look like if the administration’s tax-cutting, deregulating agenda doesn’t materialize.

Technology companies have some of the biggest offshore cash holdings, with Microsoft Corp., Cisco Systems Inc., Oracle Corp. and Alphabet Inc. each keeping tens of billions of dollars outside the U.S. Stocks of those companies were all also down Wednesday.

To contact the reporter on this story: Alex Webb in San Francisco at awebb25@bloomberg.net.

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Molly Schuetz, Mark Milian