It's a Carl Icahn Market

March 7, 2013 9:14 AM EST
Tough-talking, lawyer toting activist investor Carl Icahn is having the time of his life. At 77, the rabble-rouser has his hands in the cookie jar at a number of companies. If you look at stocks 'in-play' on any given trading day there is a good chance that Mr. Icahn is involved. He is getting results and making it look easy.

One of Icahn's in-play stocks is multi-level marketing company Herbalife (NYSE: HLF). After a slug-fest with fellow activist Bill Ackman on CNBC, Icahn snapped up a nearly 14 percent stake and has an agreement with the company to nominate two of his people to the board. Icahn also has an agreement to increase his stake up to 25 percent. Some say the Herbalife trade is all about ego and his desire to create a short squeeze to inflict pain on Ackman. The two have a beef dating back 10 years related to a business deal that went bad. Ackman ended up suing Icahn and winning in court. Icahn is clearly not happy about Ackman's way of handling business and describes him as a "crying schoolboy."

Icahn is also ramping up his activism on offshore driller Transocean Ltd. (NYSE: RIG). Icahn is not happy with the company's proposed $2.24 per share dividend. Icahn wants $4 per share and is currently seeking to add three to the Board of Directors.

The activist's latest target is Dell (Nasdaq: DELL). Icahn said he is now a "substantial holder" of the stock and said the Michael Dell 'Going Private Transaction' substantially undervalues the company and is not in the best interest of shareholders. Icahn is proposing that Dell immediately declare and pay a special dividend of $9 per share. After the special dividend Icahn said the proforma "stub" would be valued at $13.81 per share using a discounted cash flow valuation methodology based on a consensus of analyst forecasts. The "stub" value of $13.81 combined with the proposed $9.00 special dividend gives Dell shareholders a total value of $22.81 per share, representing a 67% premium to the $13.65 per share price proposed in the Going Private Transaction.

In addition to the three situations mentioned above, Icahn is sitting on massive gains in Netflix (Nasdaq: NFLX), is idle-but-waiting on Chesapeake Energy (NYSE: CHK), and is happily holding his American Railcar Industries (NASDAQ: ARII), which is at multi-year highs despite a failed merger attempt with rival The Greenbrier Companies, Inc. (NYSE: GBX).

Investors are recognizing the growing value of Icahn through his publicly-traded holding company - Icahn Enterprises, L.P. (NYSE: IEP). While off the highs on a recent equity offering, shares have tripled from the $20 level in late 2008.

The implications of a 'Carl Icahn market' means shareholder activism is back. Many boards around the country have already recognized this and responded with shareholder-friendly policies like increased dividends and share repurchases. Others will have to catch up. If not, Mr. Icahn could be knocking on their door next.

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Carl Icahn, William Ackman, Michael Dell, Dividend

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