When Can Shareholders Tell Carl Icahn to Buy Back Shares?

Jan 30, 2014
J. Webster
Comments Off on When Can Shareholders Tell Carl Icahn to Buy Back Shares?


And the better question: Who needs a share buyback when you have a Twitter account and CNBC, FOX, and Bloomberg to do your stock-pumping?

Still though, if Icahn Enterprises (IEP) stock doesn’t resume the steep upward trajectory it was on for much of 2013, people will soon demand that Carl Icahn initiate a big share repurchase at his own company.

Icahn Enterprises had a good 2013, rising from around $50 per share to as high as $148 per share. However, in less than two months the stock has dropped back down to about $110.

You maybe know Carl Icahn, as he’s been busy of late, despite being nearly 80, showing up or just calling in to Bloomberg, CNBC, and Fox Business News to promote a stock he’s vulture like circling. Why is he doing all of this? Because he has companies to bend to his will. And he’s been doing it his whole career on Wall Street. A very long and successful career on Wall Street I might add.

Icahn has had some big successes recently, too, what with Netflix going from around $50 to nearly $400. Icahn sold half his position to pocket $800 million as the stock soared. What’s funny about the Netflix purchase though, is Icahn once loved Blockbuster, who Netflix more or less supplanted. Icahn is also long Herbalife, which despite being called a Ponzi scheme by his old hedge fund “friend” Bill Ackman, who’s shorting the stock, has only kept rising. And of course he had dinner with Apple’s Tim Cook about doing a bigger share buyback. Some of the other stocks Icahn Enterprises owns are: Chesapeake Energy (CHK), Forest Laboratories (FRX), Netflix (NFLX), Transocean Ltd. (RIG), Apple Inc. (AAPL), Herbalife (HLF), Nuance Communications, Inc. (NUAN), Talisman Energy Inc. (TLM) and Hologic Inc. (HOLX).

But perhaps Icahn is following his own guidelines as an activist investor and no big buyback is needed yet.

IEP did a secondary offering recently, selling 2 million shares at $144 each, and although the stock has been in a downward swing since, it means Icahn has close to $300 million to work with — money to bend a company to his will. And Icahn Enterprises is also refinancing bonds, selling some to pay off older bonds that will be due sooner. Yeah, it’s sort of like paying off one credit card with another that has a better interest rate — but on a billion-dollar level.

And you have to have some faith in Icahn, especially considering his past returns compared to the stock market. IEP saw a return of 1,850% over the past 13 years, while the S&P 500 , Dow Jones Industrial Average, and Russell 2000 had returns of 60%, 95% and 172% over the same period.

Here are the guidelines Icahn lays down as his investment strategy for Icahn Enterprises, especially in today’s current market:

1) Low interest rates, which make acquisitions much less costly and therefore much more attractive.
2) Abundance of cash rich companies that would benefit from making synergistic acquisitions.
3) Current awareness by many institutional investors that the prevalence of mediocre top management and non-caring boards at many of America’s companies must be dealt with if we are ever going to end high unemployment and be able to compete in world markets.”

Icahn has followed all three of these steps more or less with Icahn Enterprises, refinancing debt at lower rates, using cash to buy larger shares of companies, and his management is certainly a dedicated if not zealous group.

Icahn owns around 89% of Icahn Enterprises — that’s 100,436,406 shares worth $8,363,339,527. Which was also part of the reason they did the secondary offering, more shares means more liquidity.

But again, if the IEP goes lower, maybe Icahn should increase his personal stake or call for a buyback of shares in IEP. And there’s no doubt IEP shareholders should scream from the roof tops if IEP starts to dive due to some black swan type reason well under $100 a share or even back toward its $50 share price just over a year ago. That’s only fair, right? If Icahn can demand buybacks in other companies when they’re down, why can’t IEP shareholders do the same.

Even though he’s 80, Icahn wants to be as active as possible these days-just look how he’s taken to using Twitter to get his message out when he’s going to buy more shares of Apple. As a reference, since joining Twitter Buffett has tweeted four times while Icahn as tweeted 70.

It would be a worry if we weren’t seeing a vocal and active Carl Icahn on all the financial network channels. And, maybe, instead of buying back shares of IEP, Icahn just doing his active investor appearances and behind the scenes work is as good or better than a share buyback since it pushes all his stock holdings in his portfolio higher. For Icahn Enterprises, perhaps there should be a category or metric for how many tweets, TV appearances, and financial show call-ins Icahn is going to make each quarter so you can gauge the uptick in the stocks he’s holding.

But while Icahn Enterprises is down, you do get a diverse range of beaten down stocks and a nice dividend of 4.60% while you wait for Icahn to work his magic. Still, if shares dip any lower, maybe Icahn Enterprises’ shareholders can give Icahn a taste of his own medicine and demand a big buyback.

Hey, Carl, went to grab dinner and discuss a BIG share buyback of IEP?

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