Years ago, Carl Icahn gained constructive insight from reading the American novelist Theodore Dreiser. The billionaire tycoon was captivated by two of Dreiser’s novels. The finance And TitanIndustry expert Frank Copperwood chronicles the rise.
In a critical financial setback, Copperwood’s rivals conspired to call the bank on his huge personal debt. But unbeknownst to them, copperwood contains great properties that can be “drawn and imagined”. If it had been deployed, Dreiser wrote, “these people would finally have to see how powerful it was and how safe it was.” Copperwood won and Icahn said he learned an important lesson: Always have a “war chest” of money.
The 87-year-old is best known for his decades of coordinating shareholder battles with companies including Texaco, TransWorld Airlines, Apple and McDonald’s. These wars have transformed the American financial market by changing how corporations are run, orienting their management to the interests of large shareholders like Icahn.
For nearly half a century, the mere mention of his name has struck terror into the hearts of corporate executives and moved markets. But much of Icahn’s power derives from an obscure and thin business public vehicle called Icahn Enterprises, which has gone largely unexamined.
This month, Icahn came under fire from a skeptic named Nathan Anderson, who published a report by Hindenburg Research that revealed the investor’s heavy take on Icahn Enterprises shares. The revelations exposed a surprising vulnerability among the world’s wealthiest financial tycoons. Icahn has vowed to “fight back,” but his plans to secure the state remain largely a mystery.
In recent years, Icahn has made broad bets on the fast-growing market to protect his investments from future crashes. Instead of building emergency reserves, the businesses incurred losses of nearly $9bn. “Perhaps I’ve been wrong not to take my own advice in recent years,” Icahn, a native, said of these losses last week.
The dire situation has alarmed many top people on Wall Street. “It’s one of those moments in crisis where you go, ‘Holy shit, everything I thought about someone was wrong,'” said the head of a large financial firm.
Bill Ackman offers the most scathing assessment of billionaire investor Icahn’s legendary struggle with the fate of a multi-level marketing company. “Icahn’s favorite Wall Street quote [is]”If you want a friend, get a dog,” Ackman wrote on Twitter. “Throughout his impressive career, Icahn has made many enemies. I don’t know if he has real friends. He could use one here.”
In the year Born in 1936 to school teachers, Icahn grew up in a working-class New York neighborhood in Far Rockaway, Queens. After graduating from a local public high school, he earned a philosophy degree from Princeton University and supported himself by winning poker.
He briefly enrolled in medical school, but dropped out and joined the Army before settling down as a stockbroker. In the year In the late 1960s, a wealthy uncle, Icahn, bought a seat on the New York Stock Exchange and bankrolled him as a specialist in “risk arbitrage” on pending corporate mergers.
Icahn entered the public consciousness in the 1980s when he took control of TransWorld Airlines with funding from junk bond king Michael Milken. He ruthlessly sold off TWA assets for cash, and fought unions, earning the reputation of a “corporate buster.” The episode helped inspire the character Gordon Gecko in the film. Wall Street.
In recent years, Icahn, who divorced his first wife and married his assistant Gail, moved the company from a skyscraper overlooking Manhattan’s Central Park to Miami. He also worked closely with his grown children, Brett and Michelle.
Brett helped identify successful bets on Apple and Netflix and was touted as his father’s successor. Michelle’s work at the Humane Society inspired Icahn to run an unsuccessful campaign against McDonald’s animal treatment.
His attack on Icahn comes as he continues to fight companies he deems poorly regulated. On Thursday, it scored a draw in its battle with Illumina, which makes machines to sequence the human genome. Icahn accused Illumina’s management of reckless acquisitions and demanded that shareholders give the nominees three board seats. He was able to unseat Illumina but failed to win the two seats that would have helped dethrone the CEO. The result shows his lasting influence. But he is in uncharted territory.
Icahn Enterprises plunged more than 30 percent this week, more than halving the company’s value. Icahn spent billions, prompting the threat of a “margin call” from his creditors.
Whether he can win may come down to a lesson he learned from Dreiser Copperwood decades ago. Icahn told the Financial Times last week that billions were sitting outside his public vehicle. If so, he will be given one more hand to play “War Chest”.
antoine.gara@ft.com
Additional reporting by James Fontanella-Kahn
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