Carl Icahn Should Be Sailing Into the Sunset. Instead, He’s Scrambling to Save His Empire.

In 2020, Carl Icahn tapped his son, Brett, to eventually take over his eponymous investment empire, whose value had surged after years of successfully waging war with corporate America. 

Now, instead of preparing to hand over the reins with his legacy secure, the 87-year-old billionaire is fighting for the company’s survival after a short-seller attack nearly halved its value, lurching the famed investor into one of the most trying periods of his six-decade career. 

Shares in Icahn Enterprises, known by its ticker, IEP, got crushed after Hindenburg Research in May argued that it was overvalued and held assets at inflated prices. IEP, which houses Icahn’s stock investments and owns companies including an oil refiner and an automotive group, had a market value of close to $10 billion as of Friday, down from $18 billion before Hindenburg sounded the alarms. 

That has erased roughly half of Icahn’s personal fortune, bringing it to around $8.5 billion, Forbes estimates, based on his ownership of roughly 85% of IEP’s shares, and damaged his reputation as one of the most feared activists. 

Icahn rose to fame as a scrappy corporate raider in the 1980s and went on to make billions by pressuring companies including Apple to make changes to boost their stocks. His colorful public statements and brash negotiating style helped shape a new era of shareholder activism, and he looms large in the New York area, where a stadium, hospital buidings and charter schools all bear his name. 

IEP shares regained some ground in July after Icahn restructured personal loans that had been tied to the stock price, but they sank further after IEP reported disappointing second-quarter earnings earlier this month and cut its dividend in half.

Icahn, who has called Hindenburg’s report “misleading and self-serving,” issued a rare mea culpa in a letter accompanying the results. He said he had strayed from the style of investing that made him famous in favor of a bet against the market that backfired, and vowed to refocus on activism. (In trademark Icahn fashion, he also spent much of the letter berating public company CEOs and boards, comparing them to feudalistic rulers and their advisers to mercenaries.)

Icahn appears upbeat about IEP’s future, touting that an investor who’d bought shares in 2000 and reinvested dividends would have averaged a 13% annual return through July. Though both IEP’s short and long positions lost money in the second quarter, he said the company appeared to turn a corner in July, when the value of its stock investments had a net increase of $500 million.

And his famous sense of humor is undiminished.

When IEP shares opened down more than 30% the morning of its earnings release, Bill Ackman, another billionaire investor and frequent Icahn foe, tweeted, “On Wall Street, if you want a friend, buy a [dog emoji].” One of Icahn’s oft-repeated quips, it appeared to be a callback to an earlier Ackman tweet that said Icahn has made many enemies during his career and doesn’t seem to have any real friends.

In response to his younger rival’s comment at the time, the martini-drinking Icahn told The Wall Street Journal, “At least most of my friends are dead. What’s his excuse?”

But the hole Icahn is in is no joke. His plan to dig himself out of it by refocusing on activism won’t be easy, in part because his access to cash has been severely curtailed. In a sign of his diminished personal resources, he plans to take the next dividend partially in cash rather than in IEP shares as he has long done. 

Icahn’s son, Brett, 43, returned to IEP in October 2020 to lead a team of three newly hired portfolio managers who help pick the company’s big bets. IEP said at the time, and reiterated in a recent filing, that Brett is expected to replace his father atop Icahn Enterprises and as chief executive of its investment segment by 2027. But the way the agreement is structured leaves room for someone else to take over—and either way, it’s possible the elder Icahn will need more time at the helm to stabilize things.

Questions are swirling on Wall Street as to how long IEP will be able to maintain its generous dividend and whether Icahn, who has said nothing compares to the thrill of a corporate showdown, will ever wage a high-profile campaign again. Others aren’t counting him out just yet. 

“Some of the tools he perfected, like the threat of a tender offer, might not be in his toolkit in the near-term,” said Jim Rossman, Barclays ’ global head of shareholder advisory. “But until he officially closes up shop, he’s not out.”

Icahn, who moved his firm from New York to the Miami area before the pandemic, now primarily lives on an exclusive Florida island where Jeff Bezos recently purchased a home. But lately he has been managing the crisis from his East Hampton estate, where he, his wife Gail and their dogs spend the summer (and where he has been tussling with the zoning board over an unpermitted gazebo). Though he has spent long nights holed up in his home office strategizing with advisers, he has also been seen at social events as usual, including Washington Post heiress and journalist Lally Weymouth’s Fourth of July party.

Before Hindenburg put Icahn on the defensive, the most turbulent period of his career was in the 1980s, when he took airline TWA private and had highly publicized clashes with its unions. He made a hefty profit on the investment, which was chronicled in “Icahn: The Restless Billionaire,” an HBO documentary last year on his life.

IEP for the past several years has sold additional shares to bring in more cash, marketing it as an opportunity for everyday investors to invest alongside a legendary stock picker. But it would be much harder to do so now, with the stock down so much. That means launching a new activist campaign would require tapping into some of IEP’s roughly $1.6 billion in cash, which could spook investors if it isn’t quickly replenished. 

Another possibility, borrowing money against IEP’s investments, as many hedge funds do, could well bring in several billion dollars, but such a maneuver is also not likely to be warmly received by investors or Hindenburg, which tweeted recently that it is still betting against IEP shares. 

While IEP could theoretically sell some of its existing $3.8 billion of investments to free up cash, many of its current bets are underwater. 

Throughout the current ordeal, Icahn has remained focused on Illumina, where his lieutenant won a board seat just weeks after the Hindenburg report surfaced. Though the newly reconstituted board pushed out the CEO, in what was seen as an Icahn victory, the biotech firm’s shares are trading under $180, below the average price of over $200 that Icahn paid. 

Others have been even more painful, including in pharmaceutical firm Bausch Health. Bausch Health’s stock plummeted in 2022 following disappointing earnings and an unexpected legal decision. IEP also maintains big stakes in printer company Xerox and Rubbermaid-maker Newell Brands, both of which have dropped around 50% in the years since Icahn invested.

Icahn in his letter indicated activism requires patience. “Even when a shareholder wages and wins an activist campaign, boards can be so entrenched that it can take years to implement the needed changes and unlock the value and/or hidden jewel,” he wrote. One of his most successful investments, in the drug company that developed the antidepressant Lexapro, took over four years to produce a roughly $2 billion profit when it was acquired.

Write to Cara Lombardo at [email protected]