Not even billionaire activist investor Carl Icahn is able to beat the market these days. According to a Sunday report in the
New York Post, Icahn's hedge funds have fallen on tough times, suffering their first losses since opening in 2004. The losses are expected to show up when Icahn Enterprises LP, the holding company for Icahn's hedge funds and other investment vehicles, reports its second-quarter earnings Tuesday, the Post reported.
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Icahn Enterprises for the first quarter ended March 31 logged net income of $470.4 million versus $221.4 million for the year-ago period on sales of $476.9 million compared with $953.7 million for the year-ago period. The company does not break out performance of its hedge funds in its earnings report.
Shares of Icahn's publicly traded holding company have fallen nearly 50% since the beginning of the year, hovering near $69 per share in early-afternoon trading on Monday. According to the Post report, Icahn's hedge funds were up about 2% last month, but are down about 6% for the year. Not terrible, considering the S&P 500 is down about 10.4% for the year, but when investors are paying double-digit fees for hedge fund expertise, a 6% decline may be tough to stomach. And even tougher to stomach, given that the Hennessee Group Hedge Fund Index is down 0.85% year-to-date at the end of June.
The Post pointed to Motorola Inc. as Icahn's biggest loss, noting that it has fallen nearly 30% since he bought in February. While Icahn has lost on Motorola, his loss may not be as large as it appears on the surface. While a large part of his initially disclosed 5% buy-in was at just over $15 per share, nearly 33% higher than Motorola's $10.09 share price in Monday afternoon trading, his initial 5% purchase ranged from just over $10 per share to a hair above $15, and he since added about 2.6% in late March, late April and early May between about $9.30 per share and just over $10.
The report also pointed to Icahn's recent unsuccessful activist campaigns, namely his lost battle with Yahoo! Inc. to push a sale to Microsoft Corp. While the Post noted that Icahn lost about $280 million on his purchase of 70 million Yahoo! shares, he did manage to get a seat for himself and two others from his slate on the Yahoo! board, and there is no doubt that if another sale opportunity surfaces, Icahn will use his new found leverage. And with Yahoo! shareholders not exactly making a ringing endorsement in their not-so-convincing re-election of Icahn's two largest dealmaking obstacles at Yahoo!, chairman Roy Bostock and CEO Jerry Yang, Icahn may not be quite finished with his campaign to boost Yahoo! shares via a sale.
Just remember, you don't accrue $14 billion by losing. - Michael Rudnick
