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Activist investor Carl Icahn wants Apple to part with more of its huge cash pile

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Activist investor Carl Icahn just got what he wanted out of eBay, and now he's turning his sights back on Apple again. In a lengthy letter to Tim Cook, Icahn argues that Apple should make a tender offer to begin buying back stock from shareholders. Icahn says that there is a "massive undervaluation" in its stock right now, which would make buying up shares a good deal for Apple. Apple also has an enormous stockpile of money that it could be spending — $133 billion and growing — far beyond what it needs to make large acquisitions or fund new infrastructure.

Icahn sees a "massive undervaluation" in Apple's stock

A large tender offer would, of course, benefit Icahn, by driving up the price of the stock. "To preemptively diffuse any cynical criticism," Icahn writes, he has committed to not tendering any shares, regardless of the price. Nonetheless, having Apple buy up other stock will bump the price of what Icahn is holding — and Icahn is holding a good bit: 53 million shares. While his plan is clearly self-interested, increasing the stock buyback would benefit all shareholders, large and small.  If you accept that Apple's stock is undervalued, as Icahn is arguing, that's a logical goal to pursue. He notes that despite Apple's strong growth and powerful brand, it's currently trading at roughly a price-to-earnings ratio of 8x, well below its peers in the tech world and the S&P 500 average.

Icahn's letter may even be of some relief to Apple. Icahn is notorious for using aggressive tactics to get companies moving as he'd like, but he's instead turning to flattery here with continued praise of Cook. "We could not be more supportive of you and your team, and of the excellent work being done at Apple," Icahn writes. His company believes that Apple's stock should be trading at $203 per share, whereas it opened this morning at $101.50. Another part of the reason for Icahn's far higher valuation is his belief that Apple has some major new products coming, including a $1,500 4K TV. He also sees Apple selling 72.5 million Apple Watches in 2017.

Icahn has actually been proposing that Apple buy up more stock for a good while now. He dropped his last campaign for further stock buy backs earlier this year, having been satisfied by the fact that Cook was already speeding up Apple's share repurchases. Apple is responding to Icahn's letter by saying just as much. In a statement to CNBC, Apple says that "since 2013 we've been aggressively executing the largest capital return program in corporate history." Apple says that it will review the program annually, taking into account shareholder feedback.