In the view of many investors, billionaire Carl Icahn has been making some unique and potentially risky moves as of late. From his bold entry into Herbalife (NYSE:HLF), which brought noted investor Bill Ackman's short position to a grinding halt, to his recent interest in the struggling PC business (NASDAQ:DELL), Mr. Icahn has been capturing the spotlight.
With an estimated net worth of $14 billion, Icahn is a force to be reckoned with on the street. He earned the reputation of a "corporate raider" after his hostile takeover of TWA in 1985.
In 2005, Icahn won a proxy fight to add himself and two other members to the board of Blockbuster. Icahn fought CEO Jeff Antioco over ways to return the company to profits. Icahn wanted a reduction in pay for Antioco and also wanted to reinstate late fees on rentals. Antioco wanted to keep Blockbuster independent but Icahn pushed to have it buy out Hollywood Video and then sell the package (Blockbuster and its acquisitions) to a private equity firm. Antioco backed out of the deal to buy Hollywood Video because he was concerned that the package could be viewed as a monopoly by authorities.
By 2011, Carl Icahn referring to the Blockbuster deal, said:
Blockbuster turned out to be the worst investment I ever made. It failed because of too much debt and changes in the industry.
In the past couple of months Icahn has stepped boldly into Herbalife, a multi-level-marketing company that deals in nutritional products, taking a 15% stake in the company's stock. This comes after activist investor Bill Ackman publicly announced a huge short position in the company and called it a pyramid scheme. Ackman added that he expected Herbalife stock to go to zero.
Ackman and Icahn went toe to toe on live TV in a name calling session over their respective Herbalife positions.
This morning, Carl Icahn has reportedly entered into a confidentiality agreement with PC maker Dell to examine its books. This comes after Dell had reportedly reached a $24.4 billion buyout deal with another buyer a couple of weeks ago. Dell has since put its deal with the previous buyer on hold after Icahn announced that he owns a substantial stake in Dell.
Conclusion: It is a well known fact that the PC business has been running against the tide for at least a couple of years, as tablets and other products have been increasingly taking market share.
The MLM business model has recently faced headwinds as cultural shifts and internet sales have made it a much less-powerful sales model than in past decades.
Given Icahn's past judgments regarding shifts in consumer culture and technology, I would seriously look at exiting positions in both Herbalife and Dell.