Carl Icahn loses billions as the hunter becomes the hunted

The Anderson report has since slashed Icahn’s net worth by $15 billion ($23 billion). And Icahn, who has spent his life waging one noisy boardroom fight after another, has largely dismissed troubling issues. His company called the Hindenburg report “self-serving” in a statement.

in the crosshairs

Beyond that, Icahn doesn’t want to talk about it, at least not publicly. In a 90-minute interview with Bloomberg News on May 21, he declined to speak directly about Hindenburg and his report. Yes, it’s a headache, he said. But Icahn insists he has other ideas. Among them: his own latest target, the gene-sequencing company Illumina. It’s still moving forward, he said, with his proxy battle coming to a head at Thursday’s annual shareholder meeting.

“You’re going after some very powerful people, you’re pissing off some big people,” Icahn said. “If you’re going to be bothered by this, you shouldn’t be in this business.”

He admits to making at least one costly mistake: He has lost $9 billion in recent years by making false bets that financial markets would crash.

Icahn, who is general counsel, said he blew up trying to time the market. He said he learned his lesson and turned to restructuring the companies he invested in.

“I strayed from what I was really good at,” Icahn said. “Yes, I could have been richer.”

Carl Icahn is the latest target of Nate Anderson's research firm Hindenburg

Carl Icahn is the latest target of Nate Anderson’s research firm Hindenburg

These days, Icahn spends most of his time holed up at his mansion in his chic Indian Creek private island enclave northeast of downtown Miami. Locals call the island the Billionaire’s Bunker. Jared Kushner and Ivanka Trump are neighbors. So did hedge fund investor Eddie Lambert. Security personnel patrolled the location by boat. Last week, a guard — one of the 20 or so people tasked with guarding some 30 mansions — quickly turned a reporter away on the small bridge.

Icahn said he’s still playing tennis, mixing martinis and relaxing with a movie or two. At times, he sounded almost wistful, spouting about his past exploits. At other times, he sounded like he was looking forward to a new fight. Just the night before, he and his son Brett, the presumptive heir to Icahn Enterprises, were discussing the possibility of artificial intelligence over Dover plaice fillets.

“People come to me and ask, ‘How are you feeling?’ Maybe that sounds weird, but it doesn’t really affect me. It’s in my nature,” Icahn said.

“The Restless Billionaire”

It’s a strange Ragnarok moment for Wall Street as a whole. Icahn’s strategies at TWA, RJR Nabisco, Marvel, Texaco, Blockbuster — the list goes on — have gone from history to legend to verging on myth. At one point, he was branded a corporate predator. These days, he and his ilk prefer a softer-sounding term: activist investor. Just last year, an HBO documentary, Icahn: The Restless Billionairecelebrating the life and times of a character who, in his prime, was the most feared of corporate America’s CEOs.

People who knew Icahn said the reversal was bound to sting.

“He’s never been humiliated like this,” said Mark Stevens, Icahn biographer and founder of the consulting firm MSCO.

Icahn always liked to lean in the corporate establishment. “It was like breaking their golf clubs and pouring vinegar in their martinis,” Stevens said, “and Hindenburg just did it to him.”

To Icahn’s enemies — and he had a share — the Hindenburg bombshell seemed the long-awaited retribution.

Icahn had a falling out with billionaire Bill Ackman.

Icahn had a falling out with billionaire Bill Ackman.Credit: Bloomberg

Hedge fund billionaire Bill Ackman tweeted at the time of the report’s release: “There’s a karmic quality to this brief report that reinforces the notion of the cycle of life and death.” 10 years ago, 57 Ackman, 20, lost a fortune in a dispute with Icahn over Herbalife. (Icahn and Ackman declined to discuss their feud or their rift with each other.)

Hindenburg declined to comment on its report. But so far, Icahn’s response has been considered a victory. Shares of Icahn Enterprises fell 43% from May 1 through Monday.

lost decade

It’s hard to dispute Icahn’s recent lackluster performance. This is a lost decade for Icahn Enterprises stock. Over the past 10 years, prices have fallen more than 60%, while the S&P 500 has gained about 153%. Dividends make up some of the difference: Icahn Enterprises’ total return to shareholders is about 6%. But the S&P returned about 206%.

Since Hindenburg’s salvo, Icahn said he has received “a torrent” of support from shareholders. “A lot of emails say go get them, go punch them,” he said.

The publicly traded company has stakes in industries ranging from energy to food to real estate, as well as Icahn’s not-so-secret weapon: the private investment fund he uses to launch his activist campaign.

That money buys companies so Icahn can agitate for change, whether it’s new management, a strategic rethink, layoffs — whatever it takes to drive up the stock and make money for Carl Icahn. But they’re also where he made the short bets that cost him billions.

Icahn, his company and son Brett, who is also the portfolio manager of the funds, are the sole investors in the private investment vehicle.

The problem is, these private funds, the source of Icahn’s power as an activist, have underperformed for years. A dollar invested in them a decade ago is now worth less than 50 cents, according to Bloomberg calculations.

“My Army”

Those dwindling funds mean Icahn is losing the firepower he needs to deter the chief executive. So he doubled down, plowing $3.6 billion since the start of 2013.

“He once told me: ‘My money is my army, and I need an army around me,'” Stevens said.

Icahn Enterprises disclosed in February that Icahn had pledged approximately $9.8 billion worth of stock as collateral for margin loans. Those shares are worth $5.6 billion today.

He has since increased his stake by 21 million shares. If the stock price continues to fall, Icahn may have to repay the loan, or his stock may be liquidated. A margin call can put more pressure on a stock.

‘Most of us think one or two chess moves ahead. Carl always thinks there are 9 or 11 moves ahead.

Mark Stevens, Icahn biographer and founder of consulting firm MSCO.

In past regulatory filings, Icahn Enterprises has said he has plenty of other assets that he can use to repay loans and avoid margin calls. This seemingly rote language was conspicuously absent from its May document.

One question is why Icahn borrowed so much money against his stock in the first place. Before the Hindenburg, Carl Icahn was worth about $25 billion, according to the Bloomberg Billionaires Index. Today, he is worth $10 billion. Hindenburg speculated that the loans covered his investments in private funds.

Icahn declined to discuss his wealth, private foundations or margin loans for this story.

Hindenburg wasn’t Icahn’s only problem. Icahn Enterprises revealed on May 10 that the powerful U.S. Attorney for the Southern District of New York is investigating Hindenburg’s allegations. It’s the same office that tracked Wall Street in the roaring ’80s, when Icahn rose to fame. As is customary, SDNY declined to comment on public inquiries.

caught off guard

Biographer Stevens suspects that, so far, Icahn’s economic hit has been far from personal.

“They caught him off guard, he lost money, and someone was smarter than him,” Stevens said. “Those are the three worst things that could happen to Carl Icahn.”

From Icahn’s island mansion in Sunny Isles Beach up Biscayne Bay, everything is quiet at Icahn’s corporate headquarters. Icahn comes in occasionally (he tried going by boat, but it must have been a hassle). He primarily works in Indian Creek. The building manager said other employees were coming and going as usual. Icahn Enterprises has directed building staff to allow only authorized visitors into its top-floor offices.

Icahn has long been a feared figure on Wall Street.

Icahn has long been a feared figure on Wall Street.Credit: Associated Press

Carl Icahn owns approximately 84% of Icahn Enterprises. That makes shorting its shares difficult and expensive. Only about 100,000 shares were available to borrow, according to S3 Partners, a financial data firm that tracks short selling.

Icahn is already plotting his defense. Icahn Enterprises said it would repurchase up to $500 million in stock on the open market. But it may be too late to crush the Hindenburg. Aggressive short sellers tend to unwind their positions quickly after a successful campaign.

Biographer Stevens said no one should count Icahn out. “Most of us think one or two chess moves ahead,” he said. “Carl always thinks 9 or 11 steps forward.”

“Warrior Gene”

Carl Icahn is not one to leave quietly. He never has.

Today, a new generation of capitalists, and critics of capitalism, are measuring his life across the board — from humble beginnings in Queens to the pinnacle of Wall Street, battles won and lost.

Icahn half-jokingly said his mother once said he had inherited a “warrior gene.” In this HBO documentary, the camera pans from a notebook titled “People I Want to Fuck” to a pillow embroidered with the Wall Street quote: “Happiness is positive cash flow.”

At one point, Carl Icahn, husky and bearded, looks into the camera and says, “I don’t like to start a war, but if someone wants to start a war with me, there’s something in me Things like that—because I’m really looking forward to meeting them. “


Even now, at 87, Icahn is still Icahn. Speaking at Indian Creek on Sunday, he said the fight was not over.

But no one can turn back time. At one point, he considered his age and said, “I don’t really mind getting old. I still enjoy doing it.”

“It reminds me of a line from Gigi,” he added, referring to the 1958 musical.

The fountain of youth is dim as paint,

Methuselah is my patron saint.


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