Carl Icahn: Dangerous Amount Of Money Dammed Up In ETFsVW Staff
Carl Icahn CNBC Interview Podcast Icahn is going to have a big role in the Trump admin we have many questions about conflict of interest but here is what Icahn had to say on CNBC below.
But first we are almost done with our Icahn in-depth study so here are the first nine parts (timing is coincidence of course….)
- Part One: The Beginning
- Early Years: Working Through The Ranks
- Parts Three And Four: The First Battle
- Part Five: Trans World Airlines
- Part Six: Texaco & Nabisco Group
- Part Seven: Better Than Buffett?
- Carl Icahn Part Eight: Keeping Busy
- Part Nine: Lessons From Icahn
Second, conflict of interest aside an article from GlobalSlant from 9/2015 asks some good Qs about activist tactics used by Icahn.
Here is an excerpt
IF THE “ACTIVISTS” TRULY WISH TO ULTIMATELY/”DIRECTLY” OWN THE STOCK [AND INFLUENCE STRATEGIC COURSE AT A TARGETED COMPANY] THEN WHY THE LOPSIDED “FRONT END” POSITIONING IN DERIVATIVES?
1. The most obvious answer is that they are simply “trading” the 13D disclosures with the most price sensitive securities on the planet. So…a quick flip? It is possible…but unlikely.
Both JANA & Icahn have substantial records of legitimately pursuing economic/qualitative reforms at their target companies.
2. Perhaps, then, that the stock is just not liquid enough? In the cases of both CAG & FCX that is just a ridiculous thought. And, typically, if the stock is not too liquid then neither are the derivatives underlying the security.
Anyway, during JANA’s accumulation phase, CAG equity traded about 2M shares/$68M volume/value per/day and CAG is no small company = Enterprise Value = $26.2B comprised of approximately $18.9B [427M shares outstanding] of equity and $7.3B of Net Debt.
And, it appears, JANA was acquiring a position since the beginning of April…not filing with the SEC until June 18th [almost three entire months]. Positioning the common equity, during this extended time period, should not have been too challenging.
FCX was even easier to position than CAG [despite the more brief accumulation window from mid-July to mid-August]…as its liquidity was overwhelming [averaging about 30M shares/$330M traded volume/value per/day].
Actually the stock was in a virtual free-fall [down almost 40% during that time period] and, likely, could have easily been bought in the open market…without much detection…many “times over”.
And, for the record, its Enterprise Value = $31.5B comprised of approximately $12.5B [1.128B shares outstanding] of equity and $18.97B of Net Debt.
3. Another consideration is that derivatives positions, initially, require substantially less capital than core equities positions…but ultimately not…when/if exercised.
4. And then…if the expiration/maturity months are staggered it allows for a more gradual capital commitment. I suppose so.
Some of the above may be true but, even aggregated, are not a tremendously powerful argument for such a dislocated position in derivatives vis-a-vis the common equity.
And if the derivatives positions, for whatever reasons, are so attractive then why even buy any stock? [a point that Icahn seems to appreciate a whole lot more than JANA although, it seems, Rosenstein shares the general sentiment]
Now…to examine the specific positioning techniques.
DERIVATIVE POSITIONING TACTICS:
The positioning in FCX [July 17 – August 21] is just a dizzying array of purchased “forward contracts” and the extremely questionable strategy of selling puts [as the true intent is to directly position long]. As noted above some stock [minimal quantities] was “directly” purchased.
Amazingly, or not, a portion of the derivatives were purchased on margin. From the filing…Part of the purchase price of such Shares was obtained through margin borrowing.
You have to love it. Derivatives Purchased On Margin. Hey…Why Not? And this is America’s future Treasury Secretary [as in Trump]?
Specifically, Icahn’s forward contracts and short put position offer great detail.
First of all, the “forward contracts” were purchased on just about every day he was transacting. Secondly, the three different contract strike prices [mostly far “out of the money”] are articulated. Thirdly, the share counts [underlying the forward contracts] are noted. Finally, it is stated that the contracts are length-ily dated to mature/expire in March 2017.
Plus, the filing indicates a closely dated maturity/expiration for the shorted put position of mid-September 2015.
Also see some articles on topic.
Icahn: Dangerous amount of money dammed up in ETFs
Kevin O’Leary, O’Shares ETFs chairman, weighs in on Carl Icahn’s comments that investors may be ill-advised to continue buying ETFs.
Icahn: Market overhauled in the short term
Discussing Carl Icahn’s market concerns with the “Fast Money Halftime Report” traders and Jonathan Glionna, Barclays head of U.S. equity strategy.
Icahn: I’m concerned about the market in the short term
Billionaire investor Carl Icahn weighs in on the current state of the markets, including his concerns.
Icahn: Better accountability needed in corporate America
Billionaire investor Carl Icahn discusses the SEC, and how more accountability is needed in the U.S.
Icahn: Conflict of interest concerns a ‘crazy’ issue
Billionaire investor Carl Icahn discusses his agreement to serve as Donald Trump’s special adviser on regulatory reform, and conflict of interest concerns surrounding it.
Trump’s transition team expands
CNBC’s Eamon Javers reports President-elect Trump is adding Carl Icahn and economist Peter Navarro to his team.
Trump taps Carl Icahn as advisor
CNBC’s Eamon Javers reports Donald Trump met with the CEOs of Boeing and Lockheed Martin, picked China hawk Peter Navarro to run his new White House Trade Council, and tapped billionaire Carl Icahn to work on regulatory issues.
Trump to name Icahn as regulatory advisor: DJ
According to Dow Jones, President-elect Donald Trump is to name Carl Icahn as special advisor on regulatory overhaul; Icahn is also playing role in selecting next SEC chief. CNBC’s Eamon Javers reports.
Finally, an article on tyhe topic via NJ.com
Carl Icahn closed Trump Taj Mahal in Atlantic City. Now he’s advising Donald Trump.
WASHINGTON — Investor Carl Icahn, who recently closed the Trump Taj Mahal casino in Atlantic City after employees walked out over health insurance and other benefits, was named Wednesday as a special adviser to incoming President-elect Donald Trump on overhauling federal regulations. During the campaign, Trump suggested Icahn could be treasury secretary. Icahn acquired the bankrupt…
Also one from the Dailly Caller below
Trump Picks Icahn As Special Regulatory Advisor To The President
President-elect Donald Trump announced that billionaire investor Carl Icahn will serve as special advisor to the president on regulatory reform Wednesday afternoon. Trump’s pick signals he is angling to move ahead on the many deregulatory promises he made on the campaign trail. Trump pledges to deregulate the energy industry, “dismantle” the 2,300 page Dodd-Frank Act, and…