Carl Icahn: The Corporate Raider Turned Activist Investor
If there is one name most likely to be linked with the title of “activist investor”, it is without a doubt, Carl Icahn. He is renowned for his hostile takeovers of failing corporations and his vast wealth, and is considered one of the most influential men in finance today. But he wasn’t always the savvy financier he is today. Let’s take a closer look at his remarkable journey.
Early Life and Rise to Fame
Carl Icahn was born on February 16, 1936 in Queens, New York. His parents, Bella and Michael Icahn, were both immigrant Jews who owned small businesses and valued hard work and resourcefulness. From a young age, Icahn showed signs of an entrepreneurial spirit; during his teenage years, he earned a living by selling lawn furniture and working in a cigarette vending machine business.
At the age of 24, Icahn earned a philosophy degree from Princeton University and subsequently went on to obtain a medical degree from New York University. Upon completing his medical degree, he pursued a career on Wall Street, first as a stockbroker and later as a managing director of Dreyfus & Co in 1968.
Carl Icahn’s Hostile Takeover of TWA
In 1978, Carl Icahn, with no more than $4 million of his own money and leveraging the lease options he had obtained in previous transactions, orchestrated a hostile takeover of Trans World Airlines – a move that would kickstart his career as an infamous corporate raider.
Within a year of the hostile takeover, Icahn was in control of TWA and restructured the failing corporation by eliminating jobs and selling off assets. He was also accused of using aggressive methods to squeeze money out of the business, earning him his infamous title of the “corporate raider”.
Icahn’s skill and ambition earned him immediate fame and a sizable stash of money in the process. In the end, by the time Icahn sold TWA in 1988, he had made over $450 million in profits.
Icahn’s Move to Activist Investing
Icahn never fully identified as a corporate raider and realized that actively working with and within companies could be more profitable in the long run than hostile takeovers. He thus shifted his focus from hostile takeovers to activist investment and became a large shareholder in many companies. He then used his shares and extensive knowledge of the corporate world to influence certain business decisions that fostered greater success for the companies in which he’d invested.
In the following years, Icahn built a reputation for being a savvy financier who could negotiate major mergers and bring about positive changes in companies’ overall structure and profitability. Over time, Icahn also built up a large and influential investment firm, Icahn Enterprises, which houses many of his investments.
Notable Investments
Over the course of his career, Icahn amassed sizeable stakes in several well-known companies. Listed below are a few of the most noteworthy investments he has made to this day:
• McDonald’s (MCD) – Over the years, Icahn has made numerous attempts to buy out McDonald’s and incorporate it into his investment firm. In 2005, Icahn purchased around 10% of the company’s shares, forcing McDonald’s then-CEO, Jim Skinner, to make drastic changes to how the company operated.
• Apple Inc. (AAPL) – In 2013, Icahn purchased around $250 million worth of Apple’s stock, with the intention of forcing the company to increase its share buyback programs. His demands paid off – between 2013 and 2019, Apple increased their dividend 3-fold and raised stock buybacks by 11-fold.
• Motorola (MSI) – In 2007, Icahn purchased $2 billion worth of shares in the electronics company in an attempt to push them to purchase his own company, Icahn Enterprises. He eventually sold off his stake in the company after Motorola refused to comply with his demands.
• Lions Gate (LGF) – In 2010, Icahn purchased 9% of Lion’s Gate’s stock and quickly threw the smaller studio into a battle for power. After several attempts to take over the company, Icahn eventually sold off his shares four years later at a substantial profit.
• Xerox (XRX) – In 2018, Icahn purchased a 10.6% stake in Xerox and maneuvered his way onto its board of directors. He has since been using his position as an activist investor to push for a merger between Xerox and HP Inc, a move that is still under discussion.
Analysis of Icahn’s Legacy
Carl Icahn’s success as an investor is undeniable and he has become one of the most influential figures in business, particularly on Wall Street. He currently holds a net worth of approximately $20 billion and has been named the 17th wealthiest person in the United States by Forbes. Despite his immense achievements in the corporate world, Icahn is still often talked about in derogatory terms due to his hostile takeover strategies and his power-hungry attitude.
When looking at Icahn’s legacy as a whole, it is hard to deny his influence and financial prowess as an investor. He has undeniably impacted the corporate landscape by introducing a new approach to traditional investing, one that capitalizes on the power of the stock market to enable dramatic transformations of a corporation. He’s also one of the few investors who has genuinely made a difference in the lives of many companies, enabling them to make strides in their respective industries.
From his days on Wall Street as a stockbroker to his time as an activist investor today, Carl Icahn has forever left his mark on the finance world with his tenacity, business acumen, and smart investments. While many people have criticized him for his self-serving tactics, it’s hard to deny the wisdom and insight he has brought to the stock market. He has maximized his skills as an investor and pushed the limits of traditional investing, setting a powerful example for how to make the most of the stock market.
