I did understand that Apple is going to invest more money in its own shares, as a result of which, the portion of Apple, Inc. owned by other investors will be reduced. However -- what does this imply? Is this a general pattern that companies follow at some point in their lifetime?
Again, I apologize for my lack of knowledge in this domain.
MaysonL's explanation in the grandfather comment to this one is right. You do have to take into account that the 85% that will now be the new 100% will have less capital on hand, though.
If the stock market price is efficient, the new apple should only have a market cap of 85% of the old one. If it's more (or less), the stockmarket is not really rational..
The owners? The stockholders. They just aren't trading their shares on NASDAQ anymore.
MaysonL's explanation is incorrect.
Well... as it turns out, people who know about this news will realize that there is an increased demand for Apple Stock (since Apple effectively entered the market to buy their own shares). These people will hold out to sell at a higher price. More buyers means greater value for the product -the stock in this case. Others will follow slowly causing the price to gradually rise, the stock rose ~4.6% after the news broke.
People who want to sell will take the money and sell (at the higher price), while others will hold on, and will be rewarded by a higher share price of their existing Apple shares. Thus, everyone wins!
For Apple, the problem is they made entirely too much money over the last decade. Apple currently has 140 Billion dollars in cash and a market capitalization of 380 billion (including the cash, so estimated value of Apple minus the cash hoard is 240 billion). That's a ridiculous amount of money, and there's no way Apple can effectively invest it, so they are giving it back to the investors so they can invest the money elsewhere.
That doesn't mean the share price won't change in practice, but not because of the math, rather because of what investors make of the decision.