Before he manipulated Trump, Carl Icahn manipulated Apple

Can we thank “Trump’s favorite tycoon” for Apple’s accelerated stock buybacks?

Reading about his “failed raid on Washington” in the current New Yorker, I’m reminded of Carl Icahn’s run on Apple.

Icahn, who quit his position as a Trump advisor last week, is portrayed in Patrick Radden Keefe’s profile as a “germophobic, detached, relatively loveless man,” who made his billions running a high-end protection racket.

“Carl’s dream in life is to have the only fire truck in town,” a contemporary told his biographer. “Then when your house is in flames, he can hold you up for every penny you have.”

His affair with Apple, you may recall, began four years ago with a tweet:

Long story short, Icahn purchased a total of 52,760,848 Apple shares while leaning on Tim Cook to accelerate Apple’s stock buyback. Cook had dinner with Icahn and heard him out. The stock, which had hit rock bottom, began to recover. Icahn cleared $2 billion in profit before announcing, live on CNBC, that he had dumped his holdings. As I wrote the next day:

Icahn got into the stock to pressure Apple into releasing some of its billions of overseas cash to shareholders. He got his share and left. Good riddance.

The twist in the New Yorker piece about Icahn and Trump comes toward the end.

“Icahn had spent the second half of 2016 complaining bitterly about [his energy company’s] obligation to buy RINs [ethanol credits], Keefe writes. “But… in April 2017 it emerged that the company had actually been selling them. This was extremely unusual.”

“To my knowledge,” a SUNY professor told Keefe, “this is the first time you had someone taking a short position in the RIN market.”

Below: Apple share price in the Icahn years:

apple icahn fever chart

And here’s Icahn dumping his Apple shares on CNBC, which showed the stock falling as he spoke.

Ironically, Apple investors who bought and held Apple did better than the corporate raider who came and went. Here’s what’s happened to Apple after Icahn cashed out:

Apple since Icahn sold out

CORRECTION: Apple’s board began its stock buyback program in April 2012, before Icahn’s 2013 tweet, not after as an earlier version of this story implied. The board accelerated the buybacks in April 2015, expanding Apple’s capital return program to a massive $200 billion.

9 Comments

  1. Richard Wanderman said:
    The article paints an even more awful picture of Icahn than I had already. The “win at all costs” attitude that both he and Trump have that made them feel mutual admiration is despicable.

    2
    August 20, 2017
  2. Fred Stein said:
    Good article.

    I prefer Warren Buffet as a role model. He buys because he believes in and trust management, not to tweak them. And he buys to hold, rather than to manipulate.

    I would split a hair with Philip and Joseph on “massive’ buybacks. The numbers are large in $B’s and numbers of shares. But it was done slowly and deliberately. And just my opinion, the chief motivation for buybacks in not an outside raider, but rather employees. Especially in Silicon Valley where housing prices are so high and where other companies offer stock options, Tim needs to keep the hope of stock options for to attract and retain the talent to deliver the good – to us, shareholders.

    0
    August 20, 2017
  3. Patrick Beyrouti said:
    Why do we assume that Buffet will not do the same? Sell and leave us sink?

    0
    August 20, 2017
  4. Ken Cheng said:
    By the time Einhorn and then Icahn took a position in Apple, Apple had already begun their capital return program. As we know, Apple iterates products on a yearly basis. I would wager just about every long-term shareholder expected yearly iterations/updates of Apple’s capital return program. Since Apple’s cash kept growing, and if the cash was already too much when the program began, then it was getting ever too much as it continued to grow. Why wouldn’t Apple keep increasing its capital return program? Pressure or no pressure, it was the obvious thing to do.

    Personally, I’ve long believed that after tax-reform, Apple’s capital return program will really take off to even greater epic proportions. I can only assume that Buffett bought into Apple with the same expectations.

    The only credit I give Icahn is bringing additional attention to how undervalued Apple was. Unfortunately the help was limited, as the talking heads on CNBC considered Icahn’s analysis as ludicrous as they talked amongst their smug selves and shook their heads at poor Carl. Recall, Icahn’s analysis showed Apple fairly valued, pending tax reform at over $200 a share. Of course, now those same talking heads on CNBC only last week started talking about Apple $200, as a fait accompli. How quickly they forget. Traders on CNBC are great at riding the momentum, and quick to deride those who swim against the current.

    I don’t feel bad for Carl, not being on board for Apple’s recent run, I’m sure he’s done well whipping some other pony that probably responded better to his prodding.

    1
    August 20, 2017

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