AAPL Woes?

Typically when Macworld draws near, interest in Apple’s stock (AAPL) increases. While Apple, Inc. has had a tremendous year, it’s stock price has had a tumultuous year. On the first day of trading in 2006, APPL closed at $74.75. Today, December 27 2006, APPL is currently trading at $78.09.

That $4 gain hides some big swings in the course of the year – AAPL peaked at $93.16 on December 4, but was only trading at$52.50 on July 13.

That old saw “buy on the rumor, sell on the news” is very true when it comes to AAPL. For example, the stock plummeted when an analyst predicted Apple, Inc. wouldn’t be able to keep up with demand for the iPhone – which has not been released, and is currently only a persistent rumor.

It’s a far bigger problem that prosecutors are investigating forged stock options documents at Apple, Inc. It’s been known since October that Apple would have to restate it’s financial results because of irregularities in its stock options accounting. A report on Law.com titles Faked Documents May Be at Core of Apple Case renewed media interest in this issue, causing the the stock has dropped 5% on the news.

According to BusinessWeek magazine, Apple is “one of nearly 200 companies that have disclosed SEC, DOJ or internal investigations for potential backdating of stock options. Backdating refers to retroactively pegging the strike price of an option to a day when the stock traded cheaply. Options with low strike prices are more valuable to their owner because they are less expensive to exercise.”

Note that this investigation does NOT concern Apple’s financial accounting for earnings, a la Enron. However, this does put a dark cloud over Apple’s financials at a time when the company has nothing but excellent earnings and growth news to report. It will be interesting to see how Apple deals with this.

Steve Jobs said he knew about some of this backdating, but has been cleared of any wrong-doing in this issue. However, he has apparently retained his own counsel in this case.

If he is actually gets prosecuted for anything (extremely unlikely), I have two words for you APPL traders: go short.