Some investors just can’t help themselves. They pick up a couple (thousand or million) shares of a company’s common stock and become backseat drivers, activist investors advocating for their own ideas about how best the company can maximize shareholder value.
Carl Icahn — a self-made billionaire and chair of Icahn Enterprises (NYSE:IEP) — is perhaps the most well-known activist investor currently trolling Wall Street. Icahn has made a name for himself as a successful but sometimes controversial investor. He is an outspoken critic of anybody he thinks is running a company poorly, and is not afraid to shake people out of board positions. For example, he was one of the primary parties involved in the fight for the future of Dell (NASDAQ:DELL), and tweeted that, “All would be swell at Dell if Michael and the board bid farewell.”
He infamously referred to Navistar International (NYSE:NAV) as a “poster child for abysmal business decisions and poor corporate governance,” and in 2013, engaged in a somewhat tense media showdown with hedge fund manager Bill Ackman over Herbalife (NYSE:HLF), in which he said, “I don’t like Ackman, I don’t respect him, everybody knows that.”
More recently, Icahn has made very public his involvement with Apple (NASDAQ:AAPL). Apple is sitting on one of the biggest corporate war chests in history and Icahn believes that management should open the vault and return that capital to shareholders. Apple, for its part, is already implementing the largest single share repurchases authorization in history ($60 billion) and is offering an attractive 2.2 percent dividend yield, but Icahn thinks the tech company can do more.
On January 23, Icahn issued this tweet:
— Carl Icahn (@Carl_C_Icahn) January 23, 2014
In the letter, Icahn argued that, “The S&P 500’s price to earnings multiple is 71 percent higher than Apple’s, and if Apple were simply valued at the same multiple, its share price would be $840, which is 52 percent higher than its current price. It is our belief that it is the responsibility of the Board, on behalf of the company’s shareholders, to take advantage of such a large and unmistakable opportunity. Indeed, we believe that by choosing not to increase the size of the repurchase program, the directors are actually performing a great disservice to the owners, especially smaller shareholders who may not be in a position to buy more stock themselves.”
For some context, Apple’s cash hoard grew to a record-breaking level in the most-recent quarter. Taking the total of Apple’s cash and cash equivalents, short-term marketable securities, and long-term marketable securities, the company’s cash position grew to $158.8 billion, up $12 billion from the prior quarter. In comparison, Apple held a total cash position of $137.1 billion a year earlier.
On January 27, Apple released fiscal first-quarter earnings that didn’t quite live up to expectations — a beat on both the top and bottom lines, but iPhone sales volume was, ostensibly, low — and shares lost about 8 percent of their value during the regular trading session the following day. However, far from being dismayed, Icahn stayed true to his thesis and sent this message out into the Twittersphere:
Just bought $500 mln more $AAPL shares. My buying seems to be going neck-and-neck with Apple’s buyback program, but hope they win that race.
— Carl Icahn (@Carl_C_Icahn) January 28, 2014
With the purchase, Icahn owns at least 4.5 million shares of Apple stock.