Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Carl Icahn Reinvented Activist Investing for the 2020s
Transcript
- Lucas: Carl Icahn is eighty-nine years old. He's worth roughly seventeen billion dollars. And this year, he lost a board fight at Illumina, the gene-sequencing giant, over a deal he called — and I quote — 'the worst acquisition in the history of corporate America.' Luna: That's the Grail deal. Illumina bought a cancer-detection spin-off for eight billion dollars, and Icahn hated it. He said it destroyed value. Lucas: Right. And he didn't win that fight. But the fact that he was in it at all tells you something about how activist investing has changed — and how it hasn't. Illumina's market cap is around thirty-two billion. Icahn owned roughly one point eight billion. That's not a controlling stake. In the 1980s, he would have just bought the whole company. Luna: So what changed? Why didn't he go hostile the way he did with TWA or Texaco? Lucas: A few things. First, the size. Illumina is bigger than those old targets. Second, the regulatory environment makes hostile takeovers much harder — antitrust, CFIUS, state-level poison pills. But the biggest reason is that the playbook itself evolved. Today's activists don't buy companies. They buy influence. They push for board seats, spin-offs, or strategic shifts. Icahn basically invented that modern playbook, but he came to it late. Luna: He started in the 1980s as a 'corporate raider' — a term he hates. He'd buy a stake, demand changes, or launch a tender offer. TWA was the classic case. Lucas: TWA was 1985. Icahn bought control, took the airline private, loaded it with debt, and later bled it for cash. It was brutal. Employees hated him. But he made a fortune. The play was simple: find undervalued assets, use junk-bond financing, and either break the company up or squeeze out value. The targets were bloated conglomerates with hidden asset value. Luna: And that era ended with the collapse of Drexel Burnham and the rise of the 1990s bull market. So Icahn had to adapt. Lucas: He did. In the 2000s, he became a 'shareholder activist' — the label he prefers. Instead of takeovers, he launched proxy fights. His target list reads like a corporate hall of shame: Blockbuster, Yahoo, AOL, Time Warner, Apple. At Apple in 2013, he pushed for a larger buyback. Apple eventually returned over a hundred billion to shareholders. He made about eighty million on that one campaign. Luna: But the Apple campaign was gentle. He wasn't trying to break it up. He was just saying 'you have too much cash.' That's a far cry from TWA. Lucas: Exactly. And that's the transition. The modern activist is more diplomatic. They file 13D filings, write white papers, and engage with institutional investors. Elliott Management does it with surgical precision. Starboard Value targets underperforming boards. But Icahn still has that old-school aggression. At Illumina, he didn't just ask for better governance — he called the CEO 'arrogant' and the board 'asleep at the wheel.' Luna: And he still lost. Illumina shareholders sided with management. But the Grail deal was indeed a disaster — Illumina wrote down billions. So maybe his thesis was right, even if his tactics failed. Lucas: That's the tension. Icahn's track record over the past decade is mixed. From 2014 to 2024, his flagship fund returned about sixteen and a half percent total. The S&P 500 returned over two hundred and twenty percent. That's a massive underperformance. But his earlier returns were legendary. The question is whether the model works in an era where ESG and stakeholder capitalism dominate the conversation. Luna: I think the deeper question is whether activism itself has become too institutionalized. The big asset managers — BlackRock, Vanguard, State Street — they vote with management most of the time. So an activist needs their support. Icahn doesn't have the relationships he used to. Lucas: That's a great point. The power structure has shifted. In the 80s, you could win with a hostile tender offer and a junk-bond commitment letter from Drexel. Today, you need the proxy advisory firms — ISS and Glass Lewis — and you need the big index funds. Those funds are increasingly focused on long-term value and sustainability, not just short-term profit. Luna: So is Icahn a relic? Or is he just playing a harder game? Lucas: I'd say he's both. He's a relic in style — the swagger, the lawsuits, the personal attack ads. But his core insight — that underperforming companies need to be shaken up — is more relevant than ever. The difference is that today's activists do it with data and dialogue. Elliott Management's Paul Singer is just as tough as Icahn, but he operates through private letters and boardroom pressure, not press releases. Luna: And yet, Icahn's longevity is remarkable. He's been at this for over fifty years. Most activists burn out or get bought out. He's still placing bets. Lucas: That's partly because he invests his own money. Icahn's fund is mostly his own capital. He doesn't have to answer to limited partners. That gives him a longer time horizon and the freedom to be loud. It also means he can hold positions for years. At Illumina, he first bought in 2022. The fight lasted two years. Most fund managers can't do that. Luna: So what's the lesson for a CEO listening? How do you deal with an activist? Lucas: The first lesson is: don't ignore them. Icahn's biggest wins came when management dismissed him. At Illumina, the board initially refused to meet with him. That escalated the conflict. The better approach is engagement. If you have a credible plan for value creation, share it. Many activists are reasonable if they see a path. Luna: The second lesson is: know your shareholder base. If your largest holders are passive index funds, they'll likely side with management unless the activist makes a compelling case. So you need to keep those funds informed. Lucas: And the third is: have a strategy. Icahn often targets companies that are too diversified or have too much cash. If you're sitting on a pile of cash with no clear use, you're a target. If your conglomerate structure hides value, you're a target. The best defense is to preemptively unlock that value — spin off divisions, return capital to shareholders, or articulate a clear long-term plan. Luna: Speaking of which, we should mention that these conversations take time and resources to produce. If they've helped you think about your own strategy, consider supporting us at buy me a coffee dot com slash fexingo. Even a couple of bucks makes a real difference in keeping the show ad-free. Lucas: Absolutely. It's listener-supported for a reason. So, back to Icahn — his latest move after Illumina was a new position in JetBlue. He disclosed a roughly ten percent stake in February 2025, and he's been pushing for a sale or merger. JetBlue had just lost its merger appeal with Spirit, and the stock was down over sixty percent from its peak. Luna: That's a classic Icahn play: a struggling airline with an activist catalyst. He did it with TWA, with US Airways, and now JetBlue. But the airline industry today is very different. Post-pandemic, labor costs are higher, fuel is volatile, and there's less consolidation appetite. Lucas: Right. And JetBlue's board has been resistant. They adopted a poison pill when Icahn crossed the ten percent threshold. So he's now in a proxy fight again. If he wins board seats, he might push for a sale to a larger carrier like Alaska or maybe even a private equity buyer. But it's an uphill battle. Luna: So we're watching a living legend run the same play he's run since the 1980s, but on a much smaller stage. JetBlue's market cap is about one point eight billion. That's pocket change for Icahn. Lucas: Yeah. And that might be the real story. Icahn is no longer moving markets. He's taking smaller positions and fighting harder battles. His returns have suffered. But he's still in the game, and he still commands attention. Whether he's a model for future activists or the last of a dying breed — that's an open question. Luna: I think the answer is both. The tools he pioneered — proxy fights, shareholder proposals, public pressure — are now standard toolkit for any activist. But the era of the lone billionaire taking on corporate America single-handedly is probably over. The next generation will be teams of analysts with slide decks and Twitter accounts. Lucas: And that's probably healthier for the system. But it's also less dramatic. We're losing the theater of the corporate raider. Though, I have to say, I'll miss the drama. There's something entertaining about an eighty-nine-year-old man calling a CEO 'arrogant' in a regulatory filing. Luna: I'll second that. Next time, we'll look at a different kind of activist — maybe an esg focused fund like Engine No. 1, which won board seats at ExxonMobil with a tiny stake. That's the other end of the spectrum. Lucas: Perfect. For now, remember: Carl Icahn may be past his prime, but he's still teaching us about the power of a focused, persistent shareholder. And whether you're a CEO or an investor, that lesson endures.