Busy week ladies and gents.
Just wanted to drop in and do some Carl Icahn bashing since it’s the weekend.
Well, recall that time Carl Icahn upped his stake in Cheniere Energy (LNG)? Let me count the ways.
Note that Icahn’s average cost basis is ~$60 a share. Here’s now down ~$650 million.
Icahn showed up with the promise that the massive debt load was nothing to worry about. And more importantly, that the take-or-pay contracts mean LNG will be making money for centuries, even if natural gas prices go below zero.
In his old age, Icahn forgot that the spreads and prices still impact the natural gas demand. LNG runs on demand. And with prices where they are, you can forget LNG being able to lock in any multi-decade take or pay contracts. Other companies have already caught on to the boom in exporting natural gas, they’re taking market share. Let us not forget the other big overhang, China’s economy is doomed and there will be no one to buy the ratchet natural gas LNG is trying to peddle.
I’m not sure where the bottom is in LNG, but I fear it’s much lower.
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He also got claw hammered in FCX.
Don’t forget $CHK. He’s been in that baby for at least the last -50%, and I believe quite a bit longer than that
Might have to dedicate a post to FCX; I wanna love FCX (say you doubling down today on it) I just can’t get comfortable. LNG is a much larger part of the Icahn portfolio; gun to head, buying FCX over LNG.
Here’s the play on how to become a billionaire:
1. Be a millionaire in the 70s or 80s
2. Do anything related to financial engineering or investment banking (start a holding corp even)
3. Watch everything related to what you do explode in value in the 90s
4. Hang around in the 2000s and now and claim that you did something difficult.
Really something to think about here.
Will be interesting in say 2030 to look back and do a similar exercise. Don’t think the play will be VC/angel – rather, is it anything deep emerging markets related, etc.
My initial thoughts are that coal is dead, nuclear isn’t popular (and I recently saw something about its demise) sun, wind, currents don’t provide enough and at a certain point people will (they already do) become concerned with too many solar, wind current “ranches”.
Natural gas is cheap and abundant. It’s not really “clean” but it’s not oil and it’s not coal.
A 650 million loss, to Carl Icahn, may not hurt and time is irrelevant to some people.
$650mm is “pennies” on his some $20bn portfolio, so yes. But still hurts – top 5 holding for him. The other key is time these days – he’s putting his son in a tough position for when he’s gone though.
Icahn has been a disaster in anything commodity.
His recent comment that high-yield debt is a keg of dynamite ready to explode is bizarre considering he owns big chunks of companies that are sitting on the keg. How does he reconcile this in his head?
I got to thinking that too, but then it struck it, he’s probably hedging, unlike most managers. I just wrote a post on it. Activiststocks, thanks for posting this and providing me with thoughts in order to write (no sarcasm).
Can’t disagree boyaj re: hedging. Although will say that’s not Icahn’s typical MO. Should be interesting how this all plays out.
Heads are gonna roll with his commod-analysts
Really think Carl is just flying by night these days, plugging everything into his 1980s LBO model.
the auther of this article is bias and twisting the truth. the take or pay contracts are already signed and 80% of there export . 20% are reserved for spot
The “steadiness” of take or pay is the greatest lie Wall Street ever told.