Working with family is hard, especially when you’re controlling billions of dollars.
So we really can’t be judgmental about Bloomberg’s report that Carl Icahn and his son Brett are having a disagreement over the sale of half of Icahn Enterprise’s sale of its Netflix stake.
The sale was announced yesterday, after a down day for the stock, but Icahn started selling off October 10th. Now the hedge fund’s stake has been cut from to 4.5% from 9.98%.
For its part, Icahn Enterprises made $645 million off the sale alone, but apparently Brett, who suggested buying Netflix in the first place, thinks it’s still “significantly undervalued” and that if Icahn holds the stock, the fund will make even more cash.
In a public statement highlighting their differences, Icahn, 77, laid out his reasons for the sale, while his son Brett and fellow fund co-manager David Schechter argued Netflix still has significant growth potential, rewriting their contract so they can benefit if the stock advances. The billionaire investor said his cost was about $US58 a share, suggesting a gain of almost $US800 million from the transactions.
“As a hardened veteran of seven bear markets I have learned that when you are lucky and/or smart enough to have made a total return of 457 per cent in only 14 months it is time to take some of the chips off the table,” Icahn said. He didn’t respond to a call for further comment.
This is all doubly interesting because Brett Icahn has something to prove. Last year the Icahns filed a 46-page legal agreement giving 34 year-old Brett and his partner David Schecter up to $US3 billion Icahn Enterprise’s of Icahn Enterprise’s $US24 billion AUM to invest in companies with stock market value between $US750 million and $US10 billion.
Carl still has final say over a lot of their portfolio (which is internally called the ‘Sargon Portfolio’) but think of it as a trial period for Brett.
And so far, things have gone well for Brett. Even before Netflix, Sargon was killing it.
Check out what Bloomberg had to say about that when Brett and Carl signed their agreement in August of 2012:
After hiring Brett as an investment analyst a decade ago, Icahn allocated the $US300 million to his son and Schechter in April 2010 to invest in loans and securities of companies with less than $US2 billion in equity value. Their investments, internally dubbed the Sargon portfolio, generated a gross cumulative gain of 96 per cent by the end of June, according to a July 27 filing with the U.S. Securities and Exchange Commission.
So maybe Brett thinks its time for Carl to put a little more faith in him. These things happen.
And for the record, the most hilarious take on this story comes to us from Josh Brown, of Ritholtz Wealth Management, on his blog’s link fest this morning.
From The Reformed Broker: