The Most Aggressive Corporate Raider in Finance

Among the most important money masters based in New York, like Ray Dalio or Stephen Schwarzman, we can find Carl Icahn, one of the 50 richest men in the world, with a fortune worth more than $20 billion in assets. He is well- known for his hasty style as a corporate raider and as a shareholder activist. With numerous takeover and takeover attempts of some of the biggest corporations in America, Icahn is recognized by financial experts like Patrick Dwyer as a financial celebrity and an expert in arbitrage opportunities.

A flamboyant figure and an aggressive investor, Icahn is recognized as one of the inspirations for the Gordon Gekko character in Oliver Stone’s 1987 film Wall Street.

Early life and education

Carl Icahn was born on February 16, 1936. He was raised in the Far Rockaway neighborhood of Queens Borough, in New York City, a difficult place known for being a poor and rainbow-colored neighborhood with black, Irish, Jewish and Latin American immigrants.

Icahn’s mother was a schoolteacher from Brooklyn. According to him, she was always afraid to try new things. His father wants to be an opera singer but settled on being the cantor at the local synagogue, while being a lawyer.

Icahn was recognized as a gifted student. Once he began applying to colleges, his parents told him they’d only pay for college if he was accepted by the Ivy League: Yale, Harvard, or Princeton. They did all this under the assumption that Icahn wouldn’t be accepted since they believed those schools didn’t take kids from that side of town.

But Icahn applied despite the opinion of his parents and was accepted by all of them. He chose to attend Princeton, and then his father had to pay a $750 dollar bill in the 1950s. Besides tuition, other expenses like room, board, and books needed to be covered by Icahn and to do so, he took a summer job at the cabana club in the Rockaways. It was there where his talents and skills beyond intelligence and hard work were really visible when he joined a regular poker game with some of the cabana owners. Al first he would lose every hand, but after reading three books on how to play poker, he would become a better player than any of the older guys. Icahn would win about $2,000 each summer in the 50’s, equivalent to $50,000 today.

At Princeton, the young Icahn played a lot of chess and studied philosophy. His thesis, on empiricism let him earn a school prize. Icahn later explained that his understanding of life from a philosophic perspective allowed him to become a magnate. He once stated that Empiricism is based on observation and experience, not feelings, it trains your mind for takeovers and teaches you that there is a strategy behind everything.

When Icahn graduated from Princeton, he applied and was accepted to NYU Medical School. There he studied for two years. He dropped medical school because he disliked working with corpses. Then he joined the army in 1961 for a brief period and started working on Wall Street as a stockbroker for Dreyfus & Co.

Carl Icahn_american businessman_patrick dwyer merrill lynch_Corporate Raider in Finance
Image courtesy of Insider Monkey at Flickr.com

How Icahn became successful

Carl Icahn joined Dreyfus & Co. as a broker during a strong bull market. He worked in Wall Street and gained experience working with different companies as an options manager. Once he was making enough money, he decided it was time for him to open his own shop. He talked to his uncle, a businessman who was grateful to him and asked him for the money to buy a seat on the New York Stock Exchange (NYSE), about $400,000 back in the 60’s.

Once the newly formed Icahn & Co started operating, it focused on options strategies and arbitrage, especially takeover arbitrage, which meant the company would simultaneously purchase and sale an asset to profit from a difference in the price. That is how Icahn started to make big money at the time ($1.5 to $2 million per year). A rough estimate made in the 80’s indicated that Icahn & Co net worth was at least $100 million.

In 1978, Icahn started to do more than just invest in takeover opportunities, he decided to start buying larger portions of medium size companies and demand a place on their boards and administrative changes in exchange for not selling their portion off its less-profitable parts. Icahn started to be known for his bully approach to C executives and corporate boards. It was the key to his success.

In 1985, Icahn was ready to go after some of the biggest corporations in America, making an $8 billion leveraged buyout offer for Phillips Petroleum. Phillips fought back and as a contingent measure, its board approved a stipulation declaring that in case of a hostile takeover, the company would pay shareholders in preferred shares whose terms would make the acquisition unsustainable to whoever was dumb enough to try it. Finally, Icahn agreed to sell his portion back to the company, making a reported $50 million by walking away.

Living a business life full of challenges, so far Icahn has won several battles in the business field, dealing with takeovers, mergers, acquisitions, tough contenders and 2008 national economic crisis. Currently, Icahn acts without investors and has turned to public shareholder activism through his website. He also has taken important positions in companies such as Netflix, Apple, eBay and Family Dollar.

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