Carl Icahn tries to be softer in size

Carl Icahn, the investor who has pushed to put corporate power in the hands of shareholders for the past half century and redefine the way public companies operate, seems to be accepting a slight edge. lighter in the last days of his career.

An HBO documentary about his life premiered this month depicting an outspoken and defiant multi-billionaire in a fearless boardroom who later finds new happiness in being close. than with my family.

Then, just this week, he stood up for animal rights, launching a fighting McDonald’s By the way suppliers treat pigs, he has shaken one of the world’s largest brands on full display at the age of 86.

“It sounds confusing, but I have always been annoyed by the needless cruelty,” he said in an interview with the Financial Times. “It just annoys me, especially with animals.”

He’s in a pensive mood, concerned that investors no longer have the guts to confront businesses that don’t change their ways.

“[Shareholder] Activism is on the decline and it’s a sad commentary that it’s on the decline,” he said, referring to his modus operandi of building equity in underperforming companies and a collection of shareholders to incite change.

Icahn first went public in the 1980s. With debt from sundry bond financier Michael Milken, he gained control of Trans World Airlines and ruthlessly sold his assets for cash. in the midst of a fierce battle with unions. The episode earned him the title of “corporate bandit” and is said to have made him one of the character sketches for Gordon Gekko in the film. Wall Street.

Because of the change in market value, his biggest impact was asking Apple’s chief executive, Tim Cook, to pay a large dividend in 2013. Apple began paying dividends shortly after. . Its shares have since risen about $2 billion.

Icahn has named his son Brett, who was once the driving force behind successful bets on Apple and Netflix, as his eventual successor. His daughter, Michelle’s work at the Humane Society drew him to the animal welfare issue at McDonald’s. She also helped manage his Twitter profile, and her idea was to send out a tweet announcing that he had created a stake in Apple, sending the stock soaring.

Over the years, his bandit identity has been rebranded as the more lenient “active investor,” while promoting mismanaged companies has become mainstream and a A growing group of activists has reshaped corporations from Home Depot to Canadian Pacific Railway, eBay and DuPont.

But Icahn worries that the number of investors with the stomach or capital to carry out such coups is dwindling. “We don’t have corporate democracy in this country. he said. “There are a lot of companies that are not doing well in this country. That is one of the causes of inflation. We do not make enough goods. ”

He also expressed frustration at the performance of Icahn Enterprises, the publicly traded parent company he controls, which houses most of his $16 billion fortune, according to Forbes estimates.

While the HBO documentary paints a picture of a return to the stars, the reality is different. This week, the company revealed that it lost money in 2021, including $1.3 billion in bets against the market, spanning eight years of billions of dollars in losses.

Its share price has fallen about 50% since the start of 2014, while the S&P 500 has more than doubled.

Losses stemmed from expensive hedging bets on the rapidly growing S&P 500 index and large investments in companies like Hertz and Chesapeake Energy, which went bankrupt.

“I don’t like being sidelined by the market,” says Icahn. “[We] hasn’t been doing well for the past few years mainly because I want to keep [my portfolio] fence. . . Some of these tech stocks are wildly overvalued. That’s what hurts us.”

The picture could be worse than he admits. The net value per share of assets in Icahn Enterprises has fallen by two-thirds, from $58 to $18.2, since the end of 2013, according to FT calculations.

The key factor is how the company pays an amazing $8 per share annual dividend.

Icahn, who owns about 90% of the shares, receives this dividend in stock instead of cash almost every year. As a result, the number of shares outstanding has nearly tripled since 2012. But Icahn Enterprises’ net worth has not grown in tandem, meaning its value per share has plummeted.

$line chart showing Carl Icahn paying a stock dividend diluted NAV per share

Icahn said he’s not worried about dilution because he maintains a large cash reserve and will wait for the market to turn in his favor. “I like to use cash to make my army.”

The outlook could brighten as technology valuations fall and markets are rattled by the prospect of rising interest rates. “The past two months have been pretty good for us,” he said.

Investments in energy companies such as Occidental Petroleum and liquefied natural gas export port operator Cheniere could benefit from soaring energy prices.

Before closing, Icahn took the time to point out a winning trade from another mediocre year.

He bet on video game retailer GameStop at the height of the meme stock bubble in early 2021. “We shorted at the top and made a lot of money,” he laughs. .

He then quickly issued a warning: “We were very lucky. . . I learned the hard way, you can’t choose when the bubble bursts.”

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