In the asinine screed by Carl Icahn in today's WSJ, in which he makes a dubious case for shareholder activism, Carl nearly breaks his arm patting himself on the back:
At the risk of being immodest, I believe our record at Icahn Enterprises LP proves [the benefits of shareholder activism] almost to a certainty. Over the years, we have attained great success by religiously following the activist model.
If you invested in Icahn Enterprises for the period Jan. 1, 2000, to Sept. 10, 2013, you would have a total return of 1,116% today, compared with the S&P 500 total return of only 49%. In addition, the total return for IEP's hedge fund from Nov. 1, 2004, to Sept. 10, 2013, was 254%, for an annualized return of 16%. During that period, the S&P gained 80% for an annualized return of 7%. Year-to-date, our hedge fund is up by 30% as of Sept. 10.
Yeah, but what if you were unfortunate enough to have invested in one of Icahn's target companies? Speaking of which, Icahn claims:
Our record was attained not by investing in the "right" companies and hoping the stock would rise, but by investing in underperformers and forcing them to change, often by installing better managers. We never tell these managers how to run the business or micromanage; instead, we provide oversight and demand accountability.
In fact, however, a careful analysis of Icahn's performance found that:
We find that the announcement premium, while positive on average, is not statistically different from zero for firms that are subsequently delisted and is positive but significantly lower for firms that are acquired within 18 months from the initial 13D filing date compared to the surviving target firms. Icahn’s target firms are in general cash rich, have superior operating performance and higher leverage compared to their size matched industry peers. Amongst the surviving firms we find no operating improvements either in terms of profitability or spending. In fact we find that the surviving firms’ stock significantly underperforms the overall market and size matched peer firms.
Do firms that "are in general cash rich, have superior operating performance and higher leverage compared to their size matched industry peers" sound like underperformers?
So I'm calling bullshit.
It looks to me like Icahn makes his money not "by investing in underperformers and forcing them to change, often by installing better managers," but by pushing companies to go private or into being taken over (both of which result in delisting). Among firms that don't get pushed into a delisting event, there are "operating improvements either in terms of profitability or spending" and their stock price "significantly underperforms the overall market and size matched peer firms."
Which prompts a question: How do you tell when Carl Icahn's lying?
I think you know the punchline.
