It’s time to accept that Carl Icahn, the activist investor, is here to stay.
Last week, the famed corporate raider plunked down $100 million for a stake in Lyft, the ride-hailing competitor to Uber.
This week, his musings about how shareholders undervalue Apple sent shares up. It was a good for him — the value of his stake in the iPhone maker increased by $76 million in a single day.
If Silicon Valley was hoping Icahn would leave and find other industries to mess with, it isn’t happening.
The man who made his name with the hostile takeover of TWA generally goes where the money and the problems are.
Silicon Valley, with its boomtime success, is also in a period of great uncertainty. There are growing stockpiles of cash lying around at these firms. That makes many of them ripe as Icahn targets.
Last year, I wrote that Icahn should leave tech CEOs alone to pursue real innovation rather than the short-term financial gains he advocated.
But he stayed. So what should the strategy be for dealing with him?
First, invite him to dinner.
When Icahn began lobbying for Apple to buy back shares, he and Apple CEO Tim Cook met for dinner.
While Icahn (who did not respond to a request for an interview) hasn’t been satisfied by the pace of Apple’s buyback program, he has not launched an attack, either.
Instead, he has kept pressure on Apple in letters filled with compliments about the firm’s management while still arguing that the stock is too cheap, given its potential growth.
“He often makes a very good point or he wouldn’t be there,” said Charles Elson, a professor of corporate governance at the University of Delaware. “He is looking for what is undervalued, and sometimes the firm will agree with him.”
But that doesn’t mean Icahn’s insights are necessarily correct. In his analysis that Apple should be worth more, he touted the Apple TV, a product that has actually been mothballed, according to reports.
Second, tread carefully.
Last year, tech leaders revolted when Icahn called for eBay CEO John Donahoe to spin off PayPal. Icahn criticized the board and launched a proxy fight.
In an exchange that quickly became personal, Marc Andreessen, the famed investor and an eBay board member, called Icahn an “evil Captain Kirk” who just makes stuff up.
We know what happened next. Icahn dropped the proxy fight, but in the end, Donahoe reversed his position and announced that eBay and PayPal would split.
It would have been easier for eBay to consider the merits of Icahn’s ideas if he hadn’t laced them with personal attacks. But it may have been a mistake to attack him back. Andreessen will have to smooth some feathers, if he hasn’t already, now that the managing director of Icahn Enterprises will join him as a Lyft board member.
If Icahn comes knocking, companies should open the door rather than prepare for “war mode,” experts say. Icahn has 40 years as an investor, many of them as a shareholder activist and he knows how to launch a proxy fight.
“He may not know tech, but he is an excellent expert in that war,” said Larry Cunningham, a professor of corporate governance at George Washington University and author of “Berkshire Beyond Buffett.”
Third, sit back and enjoy.
It’s not often we get to see an outsider like Icahn throwing tech CEOs back on their heels. He brings an outside perspective and possibly even a rigor to Silicon Valley’s hive mind.
“Carl thinks corporate America is filled with a bunch of imperialists, with CEOs as kings and shareholders as serfs,” Cunningham said. “Corporate America thinks itself as Gulliver, who is shackled.”
That tension makes for some good drama, and possibly, better decisions for shareholders.
Contact Michelle Quinn at 510-394-4196 and mquinn@mercurynews.com. Follow her at Twitter.com/michellequinn.
