Thursday, November 26, 2009, 9:12PM ET - U.S. Markets Closed for Thanksgiving Day.

Being Carl Icahn: If It Were Easy, We'd All Be Billionaires

Posted May 16, 2008 03:45pm EDT by Aaron Task in Investing, Newsmakers
A couple of questions about Carl Icahn's efforts to amass shares in Yahoo have been nagging at me:
  • Why does Icahn need FTC approval to buy more YHOO shares?
  • If Icahn's YHOO stake is mostly via options vs. common stock, as The WSJ reports, does he have voting rights?


On the odd chance some of you are wondering the same things, I've attempted to answer them here:

The first question has a fairly straightforward answer, although Federal regulation is involved so it's not "simple."

The big issue is that Icahn is an "activist investor" as defined by the Securities Exchange Act of 1934. Activist investors must submit a 13D filing if they are going to acquire more than 5% of a company's stock. More detail can be found here.

As per his letter to Yahoo's board, Icahn is seeking "antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock"; at current prices, $2.5 billion would buy more than 5% of Yahoo's stock.

The second question is a bit more complicated to answer. According to The Wall Street Journal, Icahn currently owns "only" 9.9 million shares, not the 59 million widely reported. "How can Mr. Icahn hold the rest without actually owning them? It's because of an old strategy Mr. Icahn and other corporate raiders used in the 1980s, of matching put-and-call options," the Journal explains.

The Journal goes into the mechanics of the options trade, but Paul Kedrosky sums it up this way: "People like Icahn are notorious for playing call option tricks and parking stock with buddies to build large de facto positions without disclosing until last minute," i.e. until he's ready to declare his intentions.

For the record, Icahn has not responded to multiple requests for comment and/or an appearance on Tech Ticker.

18 Comments

madmilker
madmilker - Friday May 16, 2008 04:26PM EDT

Michael Milken made junk bonds....junk bonds made Carl Icahn most everything the man touches from 2006 until now turns to sh!! in a hand basket!

Triss
Triss - Friday May 16, 2008 04:50PM EDT

So he's a perfect addition to Yahoo!! Yang & Team.....Afterall sh!!! associates with sh!!! & Yahoo! is full of it LOL. The ship is sinking & I'm loving watching it go down :). Burn baby burn.....

Yahoo! Finance User
Yahoo! Finance User - Friday May 16, 2008 04:59PM EDT

If Icahn gets control, he'd be happy to sell to MSFT at 28 or 29 even. He still makes 200 million dollars since he bought his shares between 22-25.

joej
joej - Friday May 16, 2008 05:21PM EDT

Jerry can handle Carl.......look how torn up Ballmer is he had to run off by himself after Jerry bounced him around with a room full of mirrors.

Scott
Scott - Friday May 16, 2008 05:51PM EDT

Microsoft wins again; they'll end up buying Yahoo! for less than their original bid. Not that it really matters... I don't see how the distant #2 and #3 search players can combine to do much of anything to dent Google.

Yahoo! Finance User
Yahoo! Finance User - Friday May 16, 2008 05:54PM EDT

Hey! This looks familiar......Like Gordon Gekko buying Anacott Steel!!

worldtraveller123
worldtraveller123 - Friday May 16, 2008 07:02PM EDT

Isn't this price/stock manipulation???

worldtraveller123
worldtraveller123 - Friday May 16, 2008 09:49PM EDT

I don't like to see YHOO with MSFT. MSFT should be spinning off companies and let them compete. They just want to be the daddy with many wives and YHOO refuses to be a part of the multi-wives scheme:) What is the deal with Carl:)? Carl, We know you are rich and have many many rich friends, we know money rule the world, just don't be so obvious about it. Wiping other in public to show off how much money you have and how many rich connection you have is not good for the soul:)

Yahoo! Finance User
Yahoo! Finance User - Friday May 16, 2008 10:37PM EDT

That is awesome if you can get Mr. Carl to come on Tech Ticker!

Prithvi
Prithvi - Saturday May 17, 2008 01:27AM EDT

Jerry Yang is getting the crap that Terry Semel deserved. Give the guy a break, he created this company bottom up. Yahoo is still a very strong brand and is the ONLY company that has the intrinsic ability to compete Google. Google is worth nearly 200Billion. Go figure!

Prithvi
Prithvi - Saturday May 17, 2008 01:28AM EDT

Jerry Yang is getting the crap that Terry Semel deserved. Give the guy a break, he created this company bottom up. Yahoo is still a very strong brand and is the ONLY company that has the intrinsic ability to compete Google. Google is worth nearly 200Billion. Go figure!

gerald  o m
gerald o m - Sunday May 18, 2008 12:25AM EDT

I don't like to see yahoo in microsolf VIVA YAHOO.

Marisa
Marisa - Sunday May 18, 2008 02:19AM EDT

Balmer is really the man in charge here.

- Sunday May 18, 2008 09:21AM EDT

I expect seeing Yahoo closing above $33/ share by August.. Many sharks smelling blood..... A real feeder frenzy.....

paul m
paul m - Sunday May 18, 2008 09:50AM EDT

It's not the man with the biggest gun that wins it's the the one that shoots the best.

John
John - Sunday May 18, 2008 12:44PM EDT

comments and reviews to stories like this and others is the new wave of communicating. post an interesting article and have the public comment on it. genius. If Icahn gets control, he'd be happy to sell to MSFT at 28 or 29 even. He still makes 200 million dollars since he bought his shares between 22-25. i couldn't have written it better. bravo to who wrote that. bravo. john h john h

Josh
Josh - Sunday May 18, 2008 05:10PM EDT

I wonder if two big companies falling behind can combine and suceed? Or are we witnessing the beginnings of the end of a few really rich people stealing good ideas from thier employees? WHen will we all get tired of other people getting rich from us? And decide we are brave enough to stand up for ourselves? Bah I'd rather sit around and complain about gas prices! MISERY loves company

Yahoo! Finance User
Yahoo! Finance User - Sunday May 18, 2008 11:57PM EDT

Yahoo is a wonderful strong company who can stand on its own 2 feet and make it on it's own, they don't need the likes of Microsoft or Ican. the act made by icann was uncalled for as the board made the right decision, he can take his 9mil shares somewhere else. i am totally behind this company its product and a proud to be an investor.

Yahoo! reserves the right to refuse, or remove any comment that does not comply with the Yahoo! Terms of Service. The submission of spam, hateful, or obscene messages may result in the termination of your Yahoo! ID.
About Tech Ticker - Send FeedbackDisclaimer. Copyright © 2007 Yahoo! Inc. All rights reserved.
Copyright/IP Policy - Terms of Service - Privacy Policy - Help
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges.

Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. Fundamental company data provided by Capital IQ. Financials data provided by Edgar Online. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Analyst estimates data provided by Thomson Financial Network. All data provided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.