The Morning Brief: Icahn Turns Up Heat on Apple, EBay
It was a busy day for raider-cum-activist investor Carl Icahn, who no longer manages a hedge fund but whose investments are still widely followed on Wall Street. In a press release announcing fourth quarter results, e-commerce company eBay revealed that Icahn owns 0.82 percent of eBay’s shares and has nominated two directors to its board. Icahn has submitted a non-binding proposal for a spinoff of its PayPal business into a separate company, according to eBay. The company said it “welcomes the opportunity to listen to the perspective of all of its shareholders, including Mr. Icahn,” adding that his nominations will be passed on to the board’s corporate governance and nominating committee.
“We would note that eBay has a world-class board of directors, with directors who have significant experience in technology and financial services,” the company says in the press release. Regarding Icahn’s spinoff proposal, eBay said its board “routinely assesses the company’s strategic direction and has explored in depth a spinoff or separation of PayPal,” but that its board has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value. EBay also announced a new $5 billion stock repurchase program.
Earlier the same day, Icahn announced he is once again turning up the heat on Apple, saying that he bought an additional $500 million worth of Apple stock, bringing his total holdings to roughly $3 billion. He emphasized in an interview on CNBC that he initially disclosed his Apple stake when the shares dropped to around $468 last August. “I think Apple is a no brainer,” he told the business network, citing Apple’s nine times price-earnings multiple on 2014 consensus earnings. “We look for these no brainers.” Other recent examples include Netflix, Hain Celestial Group and Chesapeake Energy.
Icahn also ramped up his case for a major stock buyback, blaming Apple’s board of directors and not top management for failing to do so. However, he said the big losers are the small investors. He is happy to keep buying more shares until Apple finally relents on the issue. Shares of Apple closed up slightly on the day, at $551.51. In his typical freewheeling style, Icahn refused to confirm nor deny whether he owns shares of Hertz, which has been widely reported. He said people “may be surprised” on February 14, presumably alluding to when his equity portfolio for year-end will be filed with regulators. Icahn also teased his audience that in the next few weeks he will be talking about “another big one.” He promised his Twitter followers that they will hear it first. Stay tuned.
David Einhorn’s Greenlight Capital told investors in its fourth quarter letter that it added several new long positions to its portfolio. They include a large position in Micron Technology, maker of semiconductor memory chips, which was a large short position from January 2001 to February 2005. “The industry has changed and so has MU,” the New York–based, sometime-activist hedge fund states in the letter. It also established new medium-sized positions in energy giants BP and Anadarko Petroleum. Greenlight, which was up 19.1 percent last year, also closed out positions in Airbus Group, formerly known as the European Aeronautic Defence & Space Company (EADS), and Germany-based ThyssenKrupp.
Summit, New Jersey–based Pine Grove Asset Management has launched the Pine Grove Alternative Institutional Fund, a registered closed-end fund of funds for accredited investors. The fund will invest in relative value and event driven hedge fund strategies with a core focus on credit investing. According to Pine Grove materials obtained by Alpha, several of the underlying hedge funds in the portfolio include distressed offerings from Contrarian Capital Management and LibreMax Capital and hedged credit funds from King Street Capital, Anchorage Capital Group and Whitebox Advisors. Altogether the fund’s portfolio will have about 25 to 35 managers. The fund will mimic a similar unregistered fund offered to institutions and investors will have a quarterly tender offer. Pine Grove says in its announcement the fund can be accessed through CAIS, a financial product platform servicing the independent wealth management community.
Hedge fund favorite Valeant Pharmaceuticals International announced it launched a new securities repurchase program beginning November 22, 2013. Under the program, it may purchase up to $1.5 billion of its convertible notes, senior notes, common shares and/or other debt or shares that may be issued prior to the completion of the program. It replaces the company’s previous repurchase program, which expired on November 14, 2013. Last year, Valeant was a big winner for a handful of hedge funds, including Jeffrey Ubben’s San Francisco-based ValueAct Capital and Stephen Mandel Jr.’s Greenwich, Connecticut-based Lone Pine Capital.
After the market closed Wednesday, shares of Netflix surged around 15 percent after it reported quarterly results that were much better than expected. This includes the closely-watched total subscriber number.