Carl Icahn

Carl Icahn grew up in a modest apartment in Far Rockaway, Queens, the son of Bella, a schoolteacher, and Michael, a cantor at a small synagogue who had trained as a lawyer and never practised. The family was not poor, but the household was airless and combative, and the young Icahn learned to argue early and often. His mother pushed him toward medicine. He preferred poker.

He arrived at Princeton in 1953 on a partial scholarship and covered the rest by working summers as a bellhop at Grossinger’s in the Catskills, where the maids’ quarters ran an all-night card game and the tips were quietly taxable. He took a philosophy degree in 1957, with a senior thesis on Carnap and Hempel’s empiricist criterion of meaning that almost nobody at Dreyfus or anywhere else would ever read. His mother got her wish anyway: he enrolled at NYU medical school that autumn.

The decision lasted two years. Icahn told friends the sight of patients made him claustrophobic, and the pace of rounds drove him to despair. He dropped out in 1957, joined the army, won around four thousand dollars at poker on base, and used the stake to begin trading. In 1961 he took a job at Dreyfus & Co., where the options desk was a backwater that nobody wanted. He spent a decade there working out the arithmetic of put-call parity before most of his competitors understood why it mattered, and in 1968, with a $400,000 loan from his uncle Elliot Schnall, he bought a seat on the New York Stock Exchange and hung out his own sign.

The first raids

By the late 1970s Icahn had drifted from options pricing into something stranger. He had noticed that certain American industrial companies, especially the sleepy, sprawling ones, were worth more in pieces than the market valued them as a whole. A determined outside shareholder, loud enough and credible enough, could sometimes force a board to close that gap. The technique was almost mechanical. Buy enough stock to be unignorable. Threaten a tender offer for the rest. Demand asset sales, a special dividend, new management, or a buyback of his own shares at a premium. If the board paid him to go away he won. If they refused and he took the company, he won by carving it up himself.

Tappan Stove was the prototype. He took a stake in 1977, ran a proxy fight on a platform of sale or breakup, and inside a year the company sold itself to Electrolux. Icahn’s profit was around $2.7 million, enough to fund everything that followed. Hammermill Paper, Saxon Industries, Marshall Field, Owens-Illinois, ACF Industries, Dan River, Phillips Petroleum: the same pattern repeated, with the targets growing each year. A few boards fought back and lost. Most paid him to leave.

The press eventually named the practice. Greenmail. The word welded “greenback” to “blackmail” and stuck. Icahn objected to the framing in interviews, sometimes with charm and sometimes with profanity, but he never disputed the arithmetic.

The TWA siege

By early 1985 he was looking at his largest target yet. Trans World Airlines was a household name, badly run, and quietly desperate. Frank Lorenzo of Texas Air had already tried to buy it on terms the unions despised, and TWA’s management was looking for any rescuer who was not Lorenzo. Icahn, who would later admit he barely flew and did not care for airlines, began buying shares in April. By summer he owned just over 20 percent of the company. The unions, terrified of Lorenzo, came to him with a remarkable proposition: roughly $300 million a year in wage concessions if he took control.

He took it. In January 1986 he became chairman of TWA. What followed was a clinic in value extraction. He sold the transatlantic routes to American Airlines in 1991 for roughly $445 million. He sold the prized London Heathrow landing slots. He took the company private in 1988 in a leveraged transaction that paid him around $470 million in cash and put the debt onto the airline’s balance sheet. By the time TWA filed for bankruptcy in 1992 he was long gone and richer. The business writer Allan Sloan, who covered the saga in real time, later wrote that Icahn had treated TWA “like a piggy bank with wings.”

The method

His genius was structural, not operational. A public company, Icahn understood, was not one entity but a parcel of separable assets: routes, real estate, brands, divisions, lease contracts. The market frequently priced the parcel for less than the sum of its parts, because boards lacked either the will or the freedom to break it apart. The raider’s job was to point this out, loudly, with enough capital behind him that the directors had no choice but to listen.

“The threat was the product. The takeover was just the delivery mechanism.”

When a board capitulated and bought him out at a premium, the campaign paid. When it refused and he took control, the carve-up paid. The strategy had no losing branch, only a slower one.

Activist, not raider

The Reagan-era raiders came apart in the late 1980s. Boesky cooperated. Milken pleaded. Drexel collapsed. Junk-bond financing dried up for a few years and the financial press lost interest in colourful villains. Icahn waited. He kept Icahn & Co. alive, kept the public holding vehicle that became Icahn Enterprises, and slowly traded one vocabulary for another.

By the mid-2000s the same playbook was running under a new name. “Activist investor” replaced “corporate raider”. Proxy fights became “engagements”. The targets grew bigger. He pushed for a breakup of Time Warner in 2006 and lost. He won a long campaign at Motorola that ended in the split between Motorola Mobility and Motorola Solutions. He bought into Yahoo, Netflix, Apple, eBay, Dell, Herbalife, Hertz, and Cigna, and made money on most of them.

Apple was the most public of the lot. On August 13, 2013, he tweeted that he had taken a “large position” and that the stock was extremely undervalued. The market added roughly $17 billion to Apple’s value that afternoon. He dined with Tim Cook to argue for a much bigger buyback. By the time he sold the position in 2016 he had cleared something close to $2 billion on the trade and helped push Apple into what would become the largest capital return program in corporate history.

Not every campaign worked. The Herbalife trade became a six-year public brawl with Bill Ackman, who shorted the stock on a pyramid-scheme thesis. Icahn went long, Ackman went short, and the disagreement spilled onto live CNBC in January 2013 in a thirty-minute on-air shouting match that traders watched in real time on their desks. Icahn eventually won the trade and lost very little of his appetite for confrontation.

Today

Icahn Enterprises is a publicly traded holding company with positions in automotive, energy, real estate, and packaging. The personal fortune has compressed and expanded with the years. A 2023 report from short-seller Hindenburg Research knocked roughly half off the stock in a few days. He answered with a long letter to shareholders, cut the dividend, and kept fighting. He is in his late eighties and still places phone calls at hours that make his counterparties wince. His vocabulary is gentler than it was at Tappan. His arithmetic is the one thing he has never bothered to change.