Yahoo!: Poker-Faced Icahn Gets OK to Increase Investment

At last week’s D6 trade conference, a question was asked of Rupert Murdoch about Carl Icahn’s grab at Yahoo (YHOO). Mr. Murdoch, often frank and to the point, replied “that’s not serious. He just wants to make a few hundred million bucks.”

Accurate or off base, one mogul’s insight on another is always fascinating. Here, I’d suspect the conclusion is true as well. Icahn is a special kind of value investor – he looks for corporate weakness and tries to turn it into short term investment opportunity. He’s an opportunist imbued with the mentality of a trader, together mixed in with the instinct of a predator and the guile of a poker player. He’s honed his game over years of practice. The playbook is in memory; tried and true.  Yahoo, as a target,  was looking weak. The opportunity was there.

Of course, it usually takes money to make money. A ten percent return on a thousand dollar investment will buy a decent dinner. A ten percent return on a billion dollars is an entirely different kind of achievement. Icahn has no shortage of cash.

To date, he has spent more than a billion dollars buying up Yahoo stock; about 59 million shares as of last report. That equals more than 4% of the company, by ownership. Expanding the opportunity, Friday the Federal Trade Commission gave him the green light to more than double that existing position, should he choose to.

As part of a routine process, Icahn and his affiliated fund entities were cleared to invest as much as $1.5 billion more.

For now, there’s little reaction to the approval. Icahn seems to be sitting quietly behind the mask of a public poker face. With more buying a possibility, even a probability, it would likely be contrary to his interests to stir things up. That will change.

Like a poker game, this is the early stage. The antes are in and the first round of bets has been made but there’s plenty yet to unfold. It is just the beginning. There will be more cards, more bets, more intrigue. The FTC ruling is equivalent to a casino lifting the table limit. It went from fixed bets to no limit.

There are a bit less than two months left before Yahoo board seats come up for official election at the shareholders meeting. The strategy and the gamesmanship is sure to expand as the deadline gets closer.

As Rupert Murdoch hinted, it’s a game. The stakes for Carl Icahn are a few hundred million and the hand is slowly and methodically being played out.

Comments

[usbworks]

Last time I checked, Icahn had not purchased 59 million shares of Yahoo. He had bought 10 million shares and options on another 49 million shares.

If Icahn is as smart as you make hime out to be, then he should have sold his 10 million shares at 27.50 before YHOO drops slowly to 24.50 over the next two weeks...

2008 Jun 01 03:07 PM

[Alex Filonov]

If it's poker game, somebody's else money should be on the table. I see nothing. First, Icahn has to take over Yahoo! board. If he fails, he's lost a lot. If he has the board, he also needs Microsoft bid. Ballmer said that Microsoft is not interested. Maybe he is, but at much lower price. Best case for Icahn: Microsoft makes a bid for $27.50. Icahn is desperate and accepts. Worst case, Microsoft doesn't make any bid. Motorola situation all over again.

Icahn doesn't understand a bit about technology. He's got lucky with BEA because Oracle was really interested and knew what to do with BEA.

2008 Jun 01 11:56 PM

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