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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.

21 Comments

madmilker57
madmilker57 - 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.

northstormmen
northstormmen - 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.

you
shadowball245 - 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.

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

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

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

Isn't this price/stock manipulation???

you
Yahoo! Finance User - Friday May 16, 2008 08:17PM EDT

Madmilker57-did'nt you comment on BSC and GFTC? Both companies in financial difficulty. However, at least JPM with govt. collaboration got the opportunity to outright buyout another bank at great discount. If say Icahn turns everything to shit, oh well-shit happens! Welcome to the real world, pal. He is a billionaire and you and I and all those tech ticker YHOO lackeys are not! Just a bunch of jealous losers. I seriously doubt if someone with Icahn's intelligence and money would even read blogs from common investors and amateur bloggers. However, you must be a professional blogger or someone who works for YHOO. I see your posts everywhere on the YHOO Finance blogs. If you have a regular job, how in the hell do you have time to write all this stuff? At least, you don't use useless profanity which only highlights any blogger's inane views. If Icahn can draw attention to YHOO and drive down its price-more power to him and MSFT! I don't want to buy YHOO at its current price. Like every sane investor NOT speculator, I prefer to buy LOW and SELL high later. This matters little if you are day trader or options trader. Spec is key there not investing LT. FYI - forgot Gulf Coast Ethanol, a worthless penny stock alongside Mustang Energy. NO Profits=NO $ except for inside mgmt/promoters. A sure way to poverty. Better to have a good time in LV,NV. At least you can have fun while losing $. What say you?

you
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:)

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

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

you
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!

you
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!

madmilker57
madmilker57 - Saturday May 17, 2008 09:44AM EDT

What say you?....well, Yahoo! Finance User, i say that ther ain't one on this blogging board that has any idea what David and Jerry had in mind when they cranked up the search engine for the very first time. You type from an investor point of view on the buy low and sell high crap only to turn around and call "tech ticker YHOO lackeys" "you and me" a bunch of jealous losers....well! type for urself and if ther is intelligence at stacking the board with a bunch of Princeton University "Genetic Dissection" alumni and strutting around like you know what makes a gr8 search engine purr like a kitten....you have had to also graduated from Princeton. There has not been one person from Silicon Valley to Wall Street that has type the words...."it's not about money" and until that happens all the "my sh!! don't stink" a!!holes that think with their pocket book and the turnips and nincompoops that only write in their point of view will never be able to put this search engine on the right path until they all understand "Houghnhnm" rules. Oh! and when it comes to wealth....remember Job 1:20 through 1:22 Then Job arose, and rent his mantle, and shaved his head,and fell down upon the ground, and worshipped, And said, Naked came I out of my mother's womb, and naked shall I return thither: the LORD gave, and the LORD hath taken away; blessed be the name of the LORD. In all this Job sinned not, nor charged God foolishly.

madmilker57
madmilker57 - Saturday May 17, 2008 09:44AM EDT

What say you?....well, Yahoo! Finance User, i say that ther ain't one on this blogging board that has any idea what David and Jerry had in mind when they cranked up the search engine for the very first time. You type from an investor point of view on the buy low and sell high crap only to turn around and call "tech ticker YHOO lackeys" "you and me" a bunch of jealous losers....well! type for urself and if ther is intelligence at stacking the board with a bunch of Princeton University "Genetic Dissection" alumni and strutting around like you know what makes a gr8 search engine purr like a kitten....you have had to also graduated from Princeton. There has not been one person from Silicon Valley to Wall Street that has type the words...."it's not about money" and until that happens all the "my sh!! don't stink" a!!holes that think with their pocket book and the turnips and nincompoops that only write in their point of view will never be able to put this search engine on the right path until they all understand "Houghnhnm" rules. Oh! and when it comes to wealth....remember Job 1:20 through 1:22 Then Job arose, and rent his mantle, and shaved his head,and fell down upon the ground, and worshipped, And said, Naked came I out of my mother's womb, and naked shall I return thither: the LORD gave, and the LORD hath taken away; blessed be the name of the LORD. In all this Job sinned not, nor charged God foolishly.

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

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

you
muslovedogs - Sunday May 18, 2008 02:19AM EDT

Balmer is really the man in charge here.

you
hotairballoonist - 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.....

you
manchisipaul - 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.

you
cc n - 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 Z
Josh Z - 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

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