Many years in the past, Carl Icahn gained a formative perception from studying the American novelist Theodore Dreiser. The billionaire investor was absorbed by two of Dreiser’s novels, The Financier and The Titan, which chronicle the rise of industrialist Frank Cowperwood.
In a decisive monetary stand-off, Cowperwood’s adversaries plot to have a financial institution name in his massive private money owed. However unbeknown to them, Cowperwood holds a big reserve of belongings that “may very well be drawn on and hypothecated”. Had been it to be deployed, Dreiser writes, “these males ought to see eventually how highly effective he was and the way safe”. Cowperwood prevails and Icahn says he learnt a necessary lesson: all the time have a “struggle chest” of money.
The 87-year-old is famed for his a long time spent orchestrating shareholder fights with firms together with Texaco, Trans World Airways, Apple and McDonald’s. These battles have reshaped US monetary markets by altering how firms are run, steering their administration in direction of the pursuits of enormous stockholders like Icahn.
For practically half a century, the mere point out of his title has struck terror within the hearts of company chieftains and moved markets. However a lot of Icahn’s energy emanated from an obscure, thinly traded public car referred to as Icahn Enterprises that has largely gone unexamined.
This month, Icahn was besieged by a sceptic named Nathan Anderson who, in a report printed by his agency Hindenburg Analysis, uncovered heavy money owed the investor had taken in opposition to his Icahn Enterprises shares. The revelation has uncovered a shocking vulnerability in one of many world’s wealthiest financiers. Icahn has vowed to “combat again”, however his plans to safe his empire stay principally a thriller.
Lately, Icahn made ever-larger bets in opposition to a fast-rising market to guard his investments from a future crash. As an alternative of constructing an emergency reserve, the trades have led to almost $9bn in losses. When confronted with these losses final week, a circumspect Icahn admitted: “Perhaps I made the error of not adhering to my very own recommendation in recent times.”
The predicament has shocked many senior figures on Wall Avenue. “It’s a type of moments in a disaster the place you go, ‘Holy shit, all the pieces I thought of someone was mistaken,’” mentioned the top of a big monetary agency.
Invoice Ackman, a billionaire investor whom Icahn tussled with in a legendary combat over the destiny of a multilevel advertising and marketing firm, provided essentially the most brutal evaluation. “Icahn’s favorite Wall Avenue saying [is]: ‘If you need a pal, get a canine,’” Ackman wrote on Twitter. “Over his storied profession, Icahn has made many enemies. I don’t know that he has any actual mates. He may use one right here.”
Born to schoolteachers in 1936, Icahn was raised within the working-class New York neighbourhood of Far Rockaway, Queens. After graduating from an area public highschool, he earned a philosophy diploma from Princeton College and supported himself utilizing poker winnings.
He briefly enrolled in medical faculty, however dropped out and joined the military earlier than settling down as a stockbroker. Within the late Sixties, a rich uncle bankrolled Icahn’s buy of a seat on the New York Inventory Trade, the place he grew to become a specialist in “threat arbitrage”, bets on anticipated company mergers.
Icahn entered public consciousness within the Nineteen Eighties when he gained management of Trans World Airways utilizing financing from junk bond king Michael Milken. He ruthlessly offered TWA belongings for money, and battled unions, incomes a popularity as a “company raider”. The episode helped encourage the character Gordon Gekko within the movie Wall Avenue.
Lately, Icahn, who divorced his first spouse and married his assistant, Gail, has moved his agency from a skyscraper overlooking Manhattan’s Central Park to Miami. He has additionally labored extra carefully together with his grownup youngsters, Brett and Michelle.
Brett helped determine profitable bets on Apple and Netflix and has been named his father’s eventual successor. Michelle’s work on the Humane Society impressed Icahn to run an unsuccessful marketing campaign in opposition to McDonald’s over its remedy of livestock.
The assault on Icahn comes as he continues to battle firms he deems poorly managed. On Thursday, he achieved a attract a struggle in opposition to Illumina, an organization that makes machines to sequence the human genome. Icahn accused Illumina’s administration of putting reckless acquisitions and requested its stockholders to provide his nominees three board seats. He was in a position to oust Illumina’s chair, however didn’t win the 2 different seats, which might have helped him dethrone its chief government. The end result underscores his enduring affect. However he’s in uncharted territory.
This week, Icahn Enterprises plunged by greater than 30 per cent, including to a drubbing that has reduce the corporate’s worth by greater than half. It has value Icahn billions and made the specter of a “margin name” from his lenders extra rapid.
Whether or not he can prevail could nicely come all the way down to the lesson he says he learnt from Dreiser’s Cowperwood a long time in the past. Icahn advised the Monetary Instances final week he had billions sitting outdoors his public car. If that’s the case, the “struggle chest” would give him yet one more hand to play.
antoine.gara@ft.com
Extra reporting by James Fontanella-Khan