Fund Lessons From Carl Icahn
Carl Icahn has made a name for himself as both a notorious corporate raider and a self-proclaimed advocate for shareholder rights. During his 40-plus years on Wall Street, he has used his massive wealth and bold personality to take on a number of large U.S. companies and earn a comfortable profit doing so.
While his influence has been felt in everything from airlines to Internet firms, Icahn has most recently set his sights on the troubled lender, CIT (CIT). It will be interesting to see if, with his trademark bold persona and relentless pressure, he can enforce changes that will turn this firm around.
Icahn was born in 1936 to a middle-class family in Queens, NY. His father was a lawyer who aspired to be an opera singer and his mother was a school teacher. After attending public school through grade 12, Icahn was accepted into Princeton University. There, he studied philosophy.
Throughout Icahn’s early childhood, his mother dreamt of one day seeing her son as a doctor. In order to please her, after Princeton he attended the New York University School of Medicine. His tenure at this institution, however, was short lived. After only two years, he dropped out and joined the Army.
After leaving the Army, Icahn’s uncle got him his first Wall Street job working for Dreyfus and Co. With Dreyfus, he built up his knowledge of the financial world and, in 1968, started his own brokerage firm, Icahn & Co.
In the 1970s, Icahn began sharpening his teeth as a corporate raider. His first attempts were aimed at small, undervalued firms. By the ’80s, however, he had gained a reputation as a raider and was setting his sights on much larger firms. One of his most notable takeovers was of TWA airlines in 1985.
With the backing of the union and majority stock ownership of the airline, Icahn was appointed as head of the board of directors as well as CEO of the TWA. At the helm, Icahn was able to drastically restructure the firm. This included selling off the firm’s valuable London routes. These moves, while profitable for Icahn, ultimately led to inescapable debt for the airline.
Before being removed from his position in 1993, Icahn was able to net millions. TWA, on the other hand, was forced to file for bankruptcy.
Other companies that have felt Icahn’s pressure over the years have include Nabisco (KFT), Motorola (MOT) and United States Steel (USX).
In 2008, Icahn set his sights on Yahoo! (YHOO). Seeing that the firm would benefit from a partnership with Microsoft (MSFT), Icahn sought membership on the firm’s board of directors. He did this buy purchasing 60 million shares of the company over the course of the year.
Once he successfully gained a seat, Icahn immediately got to work replacing the company’s co-founder, Jerry Yang, as CEO. After applying incessant pressure, he was able to achieve his goal. Yang stepped down and was replaced by Carol Bartz. Although the Microsoft-Yahoo! deal Icahn had hoped for has not materialized, the firm did eventually agree to a search-engine relationship in 2009. Year to date for the period ending Oct. 21, YHOO stock is up more than 45%.
Carl Icahn’s ability to strike fear in the hearts of some of the biggest names in corporate America has made him a household name in the financial world. However, his influence, over the years, has expanded well beyond the realm of Wall Street. In fact, Oliver Stone’s Gordon Gekko character is loosely based on the famous financier.
Today, Icahn remains focused on his goal of revamping companies he feels are managed poorly. While many have taken a hit from his abrasive approach, his hope is that he is making the world a better and safer place for today’s shareholder.
On his blog, Icahn summarizes his goals with his own 1988 quote: “A lot of people die fighting tyranny. The least I can do is vote against it.” It will be interesting to see what the future holds for this famous investor.
