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When Carl Icahn Ran a Company: The Story of TWA (pmarca.com)
178 points by bitonomics 997 days ago | hide | past | web | 123 comments | favorite

For those that don't know what is going on, here is the backstory:

Carl Icahn has recently bought a bunch of ebay stock. He has claimed the company is mismanaged. He has also personally attacked Marc Andreesen. Here is the accusation from Ichan:

1) Marc Andreesen was/is on ebay's board.

2) While on ebay's board, Marc bought most of Skype from eBay.

3) He flipped Skype to Microsoft in less than 2 years, earning himself a multi-billion dollar profit.

Carl Icahn is running Marc Andreesen name through the mud. The basic accusation is that if Marc knew Skype was so valuable as the smart phone wars were heating up, he had an obligation as a board member to give ebay better advice on the divesture.

Now Marc is fighting back.

This is a comic schoolboy fight among billionaires.

Edit: After a bit of fact checking, it looks like A16Z only invested $50M in the skype deal. Their fund at the time was around $300M. His gain was on the order of $150 million, not billions. A16Z only had around 2% of skype, and ebay retained 35%.

Carl Icahn is scum. He does serve a purpose, and scum cleans out scum every once in a while. But I believe he is a virus and a destructive force dismantling companies for personal gain. Although he is scum, if there were virus's like him, large companies would live on forever and have nothing to fear. Interesting mechanics at work.

I upvoted you, but I'm not sure I agree. If you look at people who've really disrupted industries, they don't tend to be like Carl Icahn. Increasingly, as I read up about what happened during the M&A boom of the '80s, it does seem to me that finance played an essentially destructive role during that decade and the three that have followed. I don't see very many advances that would have been impossible without the financial industry. Instead, I see an industry which has become focused on short-term profits in exchange for long-term bailouts. Carl Icahn epitomizes this trend. That's why so many people hate him.

Leveraged buy outs aren't about disruption, they're about efficiency. Any company worth doing a hostile takeover of has a working business model (product market fit) and the acquirer is betting they have a lot of expenditures that are basically irrelevant to what they do to make money, or they are running at far below full utilisation on some resources or capacities, which can be cut without materially effecting anything the customer really cares about.

It usually sucks to be the employee of a company that's just been LBOd because layoffs are almost certainly coming, and whether they are or not, you're going to have to do more work, probably with less resources.

But for society as a whole it should be a win if competently executed; getting the same product/service out of less resources leaves the now excess resources free to be used elsewhere.

well most of the time its about asset stripping and loading up a company with expensive debt and selling it before the chickens come home to roost as a recent number of company collapses in the uk proves)

Or its about forcing companys to do trendy things - bad for the long term by selling off core assets on the cheap BT selling O2 is a classic example.

In theory leveraged buyouts are all about what you describe: getting rid of incompetent management, shedding non-core businesses, and restructuring the company to be more efficient. In practice, LBOs tend to leave companies weaker than before, since people like Carl Icahn strip cash reserves and load the company up on debt instead. This means that the company is running much closer to its financial red-line than before, and so when an unforeseen contingency occurs (like a year of bad sales, or an economic recession) the company is forced into bankruptcy with ruinous costs for its remaining shareholders, managers, and line workers.

Finance probably did play a destructive role and it still does mainly because like you said its not the dividend not the big picture that matters. However, going public is one of the prime factors that subject a company to that world. Staying private keeps you "safe" to a certain degree.

Once you are in public domain I think in the long run being subject to all sorts of positive and negative inputs e.g Icahn, Pershing square weed out weak links and bad fruit. Many times good fruit gets thrown out too without realizing the tree will not yield any more produce if done so.

Finance has a very simple function in terms of what it does for companies. If its making money => it works. If it WAS making money and isn't now => it can still make money with change.

total agree!

I don't get why anyone would believe anything Carl Icahn says.

It blows my mind how people can be fooled by money.

Icahn is professional liar and has profited greatly from his ability to fool and deceive.

I don't know the whole story behind this, but Icahn calling out Andreesen for enriching himself at the expense of a company is laughable. The pot calling the kettle black.

Regardless, it's too super rich guys throwing feces at each other.

I have a slight inclination to believe Andreesen, but who knows, really.

"Icahn is professional liar and has profited greatly from his ability to fool and deceive."

Even his Twitter profile bio agrees:

"Me, I make money studying natural stupidity."


I think Marc Andreessen position is weak in this fight. I have absolutely no empathy for Carl Icahn, but on this issue, he's got a good point. It seems Marc Andreessen had a conflict of interest and instead of showing that wasn't the case, Andreessen decided to attack Icahn for stuff that aren't related to this issue, even if they were definitely questionable.

from marc's blog:

   * Throughout the eBay board’s process of divesting Skype, I fully disclosed 
   my potential interest and recused myself from all deliberations on the 
   transaction, including all discussions, negotiations, and decisions. I was 
   uninvolved in eBay’s decision to spin off Skype and in eBay’s decision to 
   choose to partner with the Silver Lake syndicate.
   * eBay’s retained ownership in the Skype spinoff was 30% vs. Andreessen 
   Horowitz’s approximately 3%. That much larger ownership gave eBay a far 
   bigger role in decision making on Skype after the spinoff than Andreessen 
   Horowitz, as well as a far bigger economic payoff on the sale to Microsoft.
Ebay retained 30%, so we're really arguing over 70% of the gain that didn't go to ebay. And some of it was always going to go back to the founders because Meg Whitman is a fucking moron -- she not only bought a company without buying the backing tech, but then proceeded to fuck over the founders, screwing them on over $1B, who retained ownership over the backing tech. No cause for bad blood there! Leadership!

Anyway, it does seem a little sketchy, but on the other hand, marc seems to have acted well within established business practices.

Also from his blog:

    (3) Restrictions on use of company confidential information by 
    any director for any purpose other than that company’s benefit.
I don't have any idea what the discussions happened between A16Z and Silver Lake, but it seems like tons of emails could be construed as a conflict.

Even a wikipedia quote is problematic:

"Through our research, we found that Skype had a core group of engineers who were completely dedicated to the mission. They stayed through the eBay acquisition and were hugely determined to make Skype the communications company of the future."

Did he learn that as a board member, or from research done at a16z?

That's the crux of it: Andreessen did the right thing. The wider question is too much of the tech landscape running through one man? All power to him: all companies want his magic, but at some stage, the web of connections will cause these issues.

What, Icahn can fling random accusations but Andreessen can't? It's all just mud-slinging.

As for Andreessen's motive, I suppose he probably thinks Icahn is making a power play and is more interested in fending off Icahn than in defending himself in this particular instance. Icahn clearly wants Andreessen on the defensive, so it kind of makes sense, though it all feels a bit embarrassing.

I understand this is all mud-slinging and I think most of us agree that Icahn probably got more mud in his past (though I am sure someone will disagree).

The question for Andreessen is that did he think (and could prove) that he's a more ethical businessman than Icahn (note I am not saying a better person here) Apparently not, at least in the Skype sale.

A mature response to mud-slinging is almost never yet more mud-slinging.

I hate to agree with Ichan, but eBay is probably one of the worst run brands ever. 15 years ago, my grandparents were excited about buying and selling crap on eBay, and they know nothing about technology.

Nowadays, it's a place to get ripped off. I have to say that I haven't even thought about eBay for many months.

They've averaged ~13% growth year over year since 2008, doing 16 billion last year. Not sure what your metric is but I hardly think that qualifies as, "worst run brands ever."

I probably misstated what I was intending to say -- I'm talking about the eBay marketplace.

The company has growth being driven by things like Paypal, enterprise storefronts and subsidiary brands abroad.

This astonishes me. I can't think of any good reason for this except for lack of competition. Among everyone I know almost no one ever buy stuff of ebay anymore and the only people I can think of who use it are mostly scammers.

Well it's a good thing you're not an eBay stockholder. I use it probably a dozen times a year to buy hard to find stuff. Stop thinking the world is you and your friends times a billion.

I think it is a great place to get:

1. Cheap crap from Taiwan

2. Random appliances parts (when something breaks and all you have is a part number)

without giving your credit card to some Chinese or yet another made-in-90ties warehouse website.

So, an app that lets you buy anonymously? Brilliant! Really! Just give your payment info to one site that you trust (because its all about trust and nothing else); they buy (maybe in bulk; maybe at a price break) FOR you.

What exists like this now? What market would be best served by this? Is your app in to YC yet?

Reminds me of when Icahn went head to head with Bill Ackman on CNBC.



Well worth the listen.

Wow. He's delusional to no end.

Pretty unlikely when a fund invests 1/6th of its total capital in a single deal, the namesake of the fund is not intimately involved. Most funds have a cap of 10% of total equity in a single deal to avoid concentration risk and even if this was 15% for a16z, they were still above this limit.

Note: since this $300MM fund, a16z has gone on to raise enormous funds many multiples of the size.

Wrong side. He didn't claim to be uninvolved with a16z's decision, but with ebay's. He resolved the conflict by walling himself off from one side of it, not by absenting himself from the process entirely.

couldn't you then make the argument that ebay missed out on the guidance of one of its smartest board members? (just playing devil's advocate here)

Category error. That's no different than being out of contact on vacation. Actually, it's better, since they were only missing his guidance on this specific subject, not anything else that came up during that time.

The shareholders could simply kick him out if they felt he wasn't doing his job. Instead they re-elected him with near-unanimity.

The alleged behavior in question is not that he didn't do his job, but that he committed various torts and federal crimes.

Marc Andreesen should be in jail over that Skype flip.

Would you like a biscuit?


In my view, after his humiliation by Apple's board, Carl Icahn feels his power (and by proxy the power of wall street) slowly and surely being stripped away by tech. This is at the root of his obsession with pmarca, who famously claimed that "software is eating the world."

The world that's being eaten is the world of Icahn and wall street financiers like him. The tech industry has its own source of finance (namely angels, vcs, y-combinator etc .. people like pmarca). Icahn's recent attention seeking is a symptom of the despair he feels at no longer being needed.

Good riddance, in my opinion.

I can't presume to understand Carl Icahn (as you admitted as well) but IMHO, this is untrue and can lead fellow HNers into an echo chamber.

First, Wall Street's role in capital markets towers over Silicon Valley. Venture Capital Assets Under Management is approximately $200 billion. Blackrock, the world's largest fund, has $4.3 trillion AUM.

Second, while I believe pmarca acted entirely in good faith and is legally in the clear, there is enough "there" to begin fighting a proxy war. For example, the (tech) market was more forgiving when Dan Loeb fought Yahoo because it got the outcome we wanted (Marissa joining, Yahoo focusing).

Let's not conflate what is arguably an ill-advised but legally legitimate proxy war with a misdirected turf war between finance and tech. As a point of reference, I'm a tech co-founder (who poorly codes) and a former investment banker.

> First, Wall Street's role in capital markets towers over Silicon Valley.

True, but what's the delta? Where are the sources of new power (and subsequently wealth) being generated? Why, for that matter, are you a former investment banker and now a tech-cofounder and coder? As I'm sure you know, you're not the only one who's made that (smart) move.

What moving around money was to the 19XXs, moving around information is to the 20XXs. That's the crux of "software is eating the world".

AUM doesn't seem a useful metric for power, in fact it's debt and so it all depends on what you do with it. What % of those assets are depreciating? How fast are the % of assets that are appreciating doing so?

I know little about capital markets, but these seem like the obvious begged questions, don't they?

New power/wealth generation is and will be in finance for the foreseeable future. I can go into great detail on this but for TL;DR purposes, I will generalize: finance > tech in making aggregate money because finance only cares about making money and tech cares about a lot of other things, which in turn generates money.

I moved into tech because I liked it, not to make money. If I were still in investment banking, I'd be making 7figures a year (and killing my soul in the process). This is not a judgment call; it's a personal choice. There exists good-willed bankers as well as selfish, rent-seeking coders.

Moving money around has not been limited to the 19XXs. It's been around since humans put a face of an important person on some piece of metal (actually earlier, but it lacks the imagery).

Power and money aren't the same thing. Power is the ability to control your environment .. i'd say that's exactly the "lot of other things" that tech cares about. Power derives from generating wealth, which is making people's lives better.

Of course, people have always moved money (and information) around (and always will). Just as we've always moved goods around. That wasn't my point. When "Brittania rules the waves" became Britain's national anthem, it was because ruling the waves (and moving goods) was the main source of power in those days. Since then, shipping has become a commodity. This is now happening to finance.

Agree to disagree my friend. I wish you well.

Andreessen has very publicly said that he wants to replace money with tech. His Bitcoin bets are public statement that he believes that this new technology will disrupt an industry: that industry is finance. The majority of the financial industry probably doesn't think the threat is credible ("First they ignore you..."), but Icahn is a bit more forward-thinking than most, and he probably realizes that Andreessen is going straight after his power base.

> First, Wall Street's role in capital markets towers over Silicon Valley. Venture Capital Assets Under Management is approximately $200 billion. Blackrock, the world's largest fund, has $4.3 trillion AUM.

This isn't really an apples to apples comparison. Most of the money managed by the big players like Blackrock is in funds that are tied to specific benchmarks and have very restrictive mandates. Relatively little of it can be redirected towards funding new companies.

Who said anything about funding new companies?

We're talking about leverage and wealth generation. Big AUM means bigger fees. Non-VC funds like hedge funds and private equity are incentivized to have huge funds because they get the fees. Since most of their work is financial engineering, more AUM means more leverage and is an advantage.

Large VC funds are disadvantaged because they're investing in growth. A 20x return off a $5M investment is more common than a 20x return off a $100M investment.

I don't think it helps either community to pit one against the other. Finance and tech are different and serve different purposes and let's leave it at that.

If "AUM" is so crucial to power, why does the market value BlackRock at less than a third of Facebook?

AUM is debt .. so its value depends on what is being done with it. To what extent that these assets can be used for "financial engineering"? They seem rather illiquid to me (and apparently the market, which feels that BlackRock's 11k employees and $4.2 trillion generate less than a third as much wealth as Facebook's 6k employees and $18 billion in total assets "under management").

And how is funding successful new companies not wealth generation? Y-Combinator has invested a total of ~$10m invested for approx a 5% share of ~500 new companies with a valuation greater than $20b and growing. It's annualized RoR is north of 50% for nearly a decade, and likely to increase henceforth.

By contrast, Berkshire Hathaway grew at ~20% for ~50 years. I predict YC will blow those numbers out of the water.

What are we discussing? Who has more power? I'm really confused by your argument because I don't think we're arguing the same points.

Can we get back to my original response to the original post: 1. Is finance irrelevant to tech as the OP suggests. I think we can both agree that it is NOT irrelevant although we can both agree its importance (as a % of GDP and in society) has diminished.

2. Does Icahn have LEGAL legitimacy for his claims. I think we both agree that there is some legitimacy, even if we don't believe in it.

3. What is the desire to pit tech vs. finance coming from? Why can't both co-exist? Who values Facebook? Investors who make money off it.

By the way, if you think YC is going to beat Berkshire Hathaway in terms of net IRR during a comparable time-frame, you're either trolling or have a limited history of venture and angel investing. Furthermore, it's worth noting that Berkshire is doing this at a much larger base, which makes Buffet's IRR that much more impressive.

I was responding to your response to someone else, maybe that's the source of confusion.

1 & 2, pretty much agree (as you suggested).

3. It isn't my aim to pit (or not to pit) these industries against each other. These are merely my observations and opinions about the direction that things are headed.

My prediction about YC/BH is entirely consistent with everything else I've written in this thread. I absolutely stand behind this prediction (with the force of all my (acknowledged) insignificance).

Why would I make such a bold claim?

1. Berkshire Hathaway / Warren Buffet are symbolic of and exemplify all that was right with finance in the 19XXs and why "moving money" was so important for wealth generation in that century. I hold them in extremely high regard (as people should, in my opinion).

2. Similarly, Y-Combinator exemplifies the best of tech startup investing so far this century.

3. While (clearly) very different in many ways, both organizations are easily mistaken to be mere investors when they add a lot more value than just money. It would be just as much a mistake to view YC as a venture or angel investor as it would be to see BH as a "private equity firm".

4. This ~century is going to be fundamentally different than the last. What "value investing" was in the 19XXs is what "black swan farming"* is going to be to the 20XXs. Just as BH defined value investing, YC has defined, and will continue to define black swan farming.

5. I could go on, but I have to get to bed.

* http://www.paulgraham.com/swan.html

Also, I do not agree, the wealth created by tech companies is legitimate progress, whereas finance is more rent-seeking/pushing tail-risk off to the government.

The link below informs much more of my world-view however. http://lesswrong.com/lw/jna/finance_as_a_career_option/ajkc

While you can be 100% correct, it's a straw man and irrelevant to my point. You can simultaneously believe finance is rent-seeking and still 100% agree with my points in response to the original post: 1) finance is much larger in capital markets; 2) Icahn has legitimacy even if he turns out to be wrong; 3) We should not dovetail into a finance vs. tech argument.

I can't help but think that Icahn is jealous of Loeb's run with Yahoo and wants a similar modern day feather in his cap. Looking at the way he publicly attacks and debates with peers like Ackerman in the Herbalife situation, I wouldn't be surprised. This is purely only speculation, of course.

The power of the street powers tech. All of the largest tech IPOs in recent memory were organized by investment firms such as Goldman Sachs and Morgan Stanley. Basically, tech in it's current iteration wouldn't exist without the street and well-structured IPOs.

Not saying I like it, just saying it's reality.

Also, Carl Icahn introduces the idea corporate democracy which is a good thing considering how much influence corporations have over our lives. The idea that at least one person can affect the outcomes of a large company like ebay perhaps shows other large firms they have the same potential.

I imagine a future where there are kickstarter-like shell entities which acquire large shares of important corporations and where backers can all vote where Exxon chooses to drill next or which companies Google should be acquiring(obviously GOOG is a bad example because they've been doing so well but hopefully you get the idea).

I know this is the basic idea behind holding shares, but perhaps the voting power can be more evenly distributing in these shell entities. In the current structure one share doesn't get you much voting power in a corporation.

> Basically, tech in it's current iteration wouldn't exist without the street and well-structured IPOs.

Are you suggesting that Facebook/Google had no value prior to their IPOs? Their public market cap is merely a reflection of the value they already provide to society.

Constitutional democracy is the least worst way to preserve individual liberty. It's not a good way to run a private corporation.

At a minimum Icahn is playing far outside of his scale. Trying to force Apple's hand - he might as well be trying to dictate terms to Exxon or Walmart, it's comical.

Icahn can bring a modest fraction of his $22 billion to bear on any given situation. That might work against financially weak companies, or companies he dwarfs (like if he picked a fight with Groupon's leadership).

Financial power players like Icahn will never go away so long as there is wealth and capital. Mostly I think he's guilty, in the Apple and eBay situations, of thinking he is much more powerful than he is (and that's saying something given his history), as he has lately been starting fights with very healthy companies far larger than he is.

It's not merely the size of the company. A proxy war against Exxon is very possible, because its stock is spread thinly.

Tech companies tend to be strongly controlled by the founders/early employees/ and early investors. These are all people who bought in to the vision of the company .. they are by and large true believers. In younger tech companies, like Google or Facebook, this control is truly absolute. There is nothing public shareholders can do.

But even in older companies like Apple or Microsoft, the founders have an almost religious appeal over the stakeholders, particularly employees and the board, but also the shareholders at large.

For example, Tesla and Spacex, though within Icahn's "striking range", might as well be subsidiaries of Musk enterprises. There's no way someone like Icahn would have a chance of besting Musk in a showdown.

Part of my point was that going after Exxon and Walmart, would be extremely difficult because of their very strong financial health (not to mention connections and influence).

Gnats don't concern Exxon, they get swatted. At that scale, Icahn is a gnat. Exxon would have to be extremely mismanaged to inspire so many investors to line-up for a serious proxy battle. Simply doesn't happen unless a company is on its back, or knee deep in a huge scandal relating to the leadership.

If you buy a billion dollars worth of Exxon and try to stir up trouble, you'll be completely ignored unless the company is being very poorly managed such that much larger fish than you are willing to join your cause.

With eBay, since Icahn is a relatively small fish (in terms of what he can personally leverage into the battle) trying to force the hand of a $75 billion enterprise, he's going to need much larger fish than himself to join his cause. He simply can't do it himself. That's the other point I was trying to make about their scale. The larger the company you take on, the larger the total resources you're going to have to get lined up on the same agenda.

I agree with mostly everything you said. The point I was making re:exxon is that you would merely have to convince rational actors of your side (which I agree is not easy if the company isn't floundering). If you get one major player on board, then it will be easier to get the next etc.

Financiers like Icahn are motivated by short term profits above all else. Building a company takes people with a long term vision. The two are often not compatible. Having a leech trying to bleed out every cent as soon as it's made is not generally a good thing unless your company throws off wads of unneeded cash like nobody's business.

>Financiers like Icahn are motivated by short term profits above all else.

That's one way to look at it.

Another is to note that Icahn built a thriving financial company that has survived for over 4 decades, and employs over 60,000 people globally. I'd say that requires long term thinking and demonstrates a bit of business acumen.

Can you explain how his financial company employs 60,000 people?

Or did you mean he has ownership stakes in industrial firms that employ 60,000 people? Because he most certainly has never created 60,000 jobs by starting a company.

>Can you explain how his financial company employs 60,000 people?

Do you think that large, multi-billion dollar financial conglomerates run themselves?

>Or did you mean he has ownership stakes in industrial firms that employ 60,000 people?

Both. Through wholly-owned subsidiaries and the financial holding company. What does it matter?

My point is, painting him like he's some inexperienced financier is utterly disingenuous. I know it's en vogue to hate on "banksters", but his business experience (and, in my opinion, economic value-added) is of a magnitude greater than Mr. Andreesen's.

Well I wasn't looking to engage in a battle of baseless statements. I asked if you can elaborate on the 60,000 employees you said his financial company employs.

Medium-size (Icahn is no Goldman or BlackRock), multi-billion dollar hedge funds and private equity groups (and similar) do not have 60,000 employees. Take a quick look reference at how many people Buffett has employed in his offices over the years. The industrial firms he owns stakes in employ lots of people, he didn't start those companies of course, and he doesn't run them.

BlackRock has 11,000 employees with a couple hundred billion in assets. Goldman Sachs has 32,000 employees with $911 billion in assets under management. To name two examples.

I'm willing to bet Icahn's financial company is extremely small in fact and employs very few people relative to the value of its holdings.

What does it matter? Because I'm fascinated by where those 60,000 people are employed.

Who's hating on bankers? Not me. Who said he isn't extremely savvy? Not me. I asked where you got the 60,000 figure, simple.

>Not me. I asked where you got the 60,000 figure, simple.

Their 10k lists each subsidiary and the number employed:


2/3 are employed by Federal Mogul, an automotive parts supplier controlled by IE.

that's the only way to look at it; Icahn is a thieving sack of shit. Look at TWA: Icahn got fucking paid no matter whether TWA succeeded or failed. I can maybe see how these leeches ought to get 1/2 billion dollar payouts if they come in and rescue a company, but 0.5B when they ruin a company?

Heads I win, tails you lose.

>that's the only way to look at it; Icahn is a thieving sack of shit.

Curious what your opinion is of Mr. Andreessen, and the conflict-of-interest accusations? is he included in your "leeches" remark, or does he get the SV pass?

The story is plausible. If I were an eBay shareholder, I'd be incensed.

What puts you in a position to be an objective judge of the dealings of billionaires?

their behavior, particularly said behavior's effects on others

Yes definitely, let's hope he's continues to be successful and handicaps more American businesses and we'll see how you feel about it in 10 years. He'll wreck more than 60,000 jobs but he'll have a lot of money for himself.

I don't know about that, I bet there is a certain level of pride and being right that motivates him too.

Profit is a measurable of how "right" Carl Icahn is.

It's kind of absurd how closely Carl Icahn's mirrors that of the story of Gordon Gekko in Oliver Stone's movie Wall Street. What Icahn did to TWA is pretty much exactly what Gekko did (or planned to do) to Bluestar Airlines in that film. Longer period of time - but in principle, very similar.

I was just about to post exactly this. Anyone interested in what Wall Street actually does needs to watch this movie.

I have an MBA. I have nothing against making money. But while it's possible to make money by creating something of value, it's unfortunately possible to make even more money while doing the opposite.

Shitpiles like this always have a "business alibi" that they create liquidity, or improve efficiency/productivity, etc. I suppose it's true that the forest needs fires, but we don't have to like them.

From what I've read, Icahn argues that the companieshe's going up against aren't do a good job of running the company. If that's true, Icahn is doing shareholders a service.

Well, let's look at the TWA story related here. Icahn took the company private just three years after buying it, then started relentlessly selling off assets. At the time it went private, he owned 77% of the company's outstanding shares -- so he was far and away the biggest beneficiary of that move, and he effectively cut the remaining 23% of the shareholders out of the profits he made by dismantling the airline over the next few years.

It's possible that TWA couldn't have been turned around and selling it off was really the best return he could get on his investment -- but I think it's at least debatable whether Icahn did anyone else much of a service. The other shareholders got to exit a company they'd lost faith in and hopefully made some money in the process, but that seems to be it as far as silver linings go.

Given what he did with TWA and reselling tickets, its hard to think that served any other shareholder but himself.

Whenever I hear a story about someone being "underhanded" and "of low character" I always see what the other side of the story is. Usually, the truth isn't so straightforward.

It appears that TWA owed him money so he negotiated the cheap ticket as a form of payment...[1] How convenient that Marc left that out of his blog post...

In the interim, Icahn negotiated for airline vouchers from the company in lieu of the $190 million that TWA owed him. As the deal included the provision that he could not sell these tickets through travel agents, Icahn founded LowestFare.com, where he both sold the tickets and created a revolution in the travel industry.


But he does mention that?

One of those creditors, to the tune of $190 million, was Icahn. He resigned as chairman in 1993, and by 1995 he was growing impatient to be repaid. TWA executives, desperate to bring the tragic Icahn chapter to a close, gave away the farm, the cows and the farmer’s wife. They came up with a deal called the Karabu ticket agreement, an eight-year arrangement that allowed Icahn to buy any ticket that connected through St. Louis… for 55 cents on the dollar and resell them at a discount.

Then of course, if you believe that the company is undervalued and can grow (and that is why you would buy it, anyway), you wouldn't try to force them to pay your money back, because they could generate a positive return on the money.

So, how did that help the other shareholders?

I don't know the details, but maybe it kept the company from filling bankruptcy by a few months? They didn't have the cash to pay the loan, so they offered the tickets.

Selling off the most profitable route, tickets, short ordering replacement aircraft - there is not one thing he did that benefited anyone but himself. Nevermind long term company value.

That doesn't make any sense. Icahn is a shareholder himself and he mainly makes his money through share appreciation. If the share price goes up, all shareholders benefit.

I don't know enough about the TWA business dealings, but sometimes a company is more valuable broken up.

Did you read the article you linked to with the stock buy-back, ticket sales, and then tanking it in Chap 11? That didn't benefit the other shareholders.

That tidbit was included in the post.

I think he was the inspiration for Gekko in the film.

It's also sometimes said that Asher Elderman was the inspiration, from his takeover of Datapoint:


Maybe, but also Ivan Boesky, to whom the Greed is good quote is attributed.

I like to see them swinging back at Icahn.

He uses wildly over-dramatic statements ('ebay is the worst run company ever') to try to force boards to do things that are specifically in his short term interests. He has absolutely no concern for the long-term well being of a company. After he gets his stock pop, he liquidates and is gone. Icahn's entire strategy operates strictly on the basis of greenmailing the leadership of a company into discharging cash into his lap. He will say anything he has to in order to generate that outcome.

Andreeson's defense seems to be that Icahn has had as many conflicts of interest and selfish motives on boards as he has, if not more.

I'm not sure that's a good defense: "He's killed twice as many people as I have, and he's been at it longer, too!"

When people so alike bicker like this in movies, they're usually about a minute away from kissing.

Marc has already pointed out that he removed himself from the decision making process regarding the divestiture of Skype and fully disclosed his conflict. ebay held 30% to his 3% during all of this so Icahn's claims seem pretty baseless and should be easily confirmed or denied by another member of the ebay board with knowledge of the proceedings.

Andreessen doesn't care about the moral dimension, he cares about the practical dimension. This series of blog posts is aimed at EBay shareholders - he's trying to convince small-time individual shareholders that if they ally themselves with Icahn they're going to get screwed. (I assume he's running a similar campaign in person with the big-time institutional shareholders.) Smart money probably knows they're going to get screwed by allying themselves with Icahn, but there is an awful lot of dumb money on Wall Street, and they are easily swayed by just a little information.

Is that quote from something? I really enjoy the dubious logic.

Can someone explain to me the significance of the animosity between Carl Icahn and pmarca? There are half a dozen posts on pmarca's blog discussing how Icahn is making claims against Andreessen. I understand these claims, but I don't understand their significance.

I deeply respect pmarca but I can imagine that he, like any high visibility person, has many detractors. What power does Carl Icahn have that warrants such a strong response?

Icahn has bought a stake in eBay. It appears to me like he is trying to force out some of the eBay board by publicly criticizing. If he succeeds in basically kneecapping the current board then he can have much more control of the company. Just skim his wikipedia page to get an idea of what the possible outcomes are: http://en.wikipedia.org/wiki/Carl_Icahn .

Icahn called out his conflict of interest in Ebay:


I submitted this under the permalink URL earlier in the day: https://news.ycombinator.com/item?id=7421591

Can any mods delete my submission and update this URL to that URL? It seems illadvised to have this item pointed at pmarca's blog homepage vs. the item we're discussing.

I don't understand what eBay's problem is. I mean c'mon, Gordon Gekko was only partially based on Icahn.

If everyone was like Icahn, we'd already be through a few revolutions. He likes to engineer market events just ask Apple. Like this article said, he does this to the detriment of everyone around and destroys value. Marc creates value and companies and Icahn from what I have seen previous and here, likes to create money for himself out of destroying that value. When the world says don't, he says Icahn.

Not sure that's the most sophisticated PR strategy. One post looks like a rebuttal, 8 look like an obsession.

He's trying to create FUD here, not look good. As the incumbent, he has the advantage; if all shareholders are paralyzed into inaction because all the major players look like assholes, he wins. He only loses if a majority of EBay shareholder votes believe that Icahn will generate shareholder value, hence he wants to make abundantly clear that Icahn destroys shareholder value to enrich himself.

With each volley that Icahn and Andreessen fire back and forth, I'm left more humbled by how incredibly smart these two men are. I feel like I'm watching master communicators slug it out and I'm learning an incredible amount from the action.

Carl Icahn is the Cryptonomicon's Dentist. A wolf that ravages, feeds and moves on.

What is it with pmarca? As a subscriber of his blog, he's been lambasting Carl Icahn for awhile now. Don't get me wrong! I hate Carl Icahn, but pmarca's critique is hard to get and overobsessive.

It's because it has gotten personal between Icahn and Andreessen. Icahn has been specifically dragging Andreessen's character through the mud since it became obvious he wasn't going to get his way on eBay.

Marc's paying for too much attention to Icahn. He should have simply issued a short statement refuting Icahn's allegations and laying out the facts, and then ignored him, like one would a crazy homeless guy ranting on the street.

Instead, it's in danger of turning into a mud-slinging contest.

Every single post in this blog seems to be about Carl Icahn.

The article left me with lots ofdoubt... Take this sequence of events:

Bought 20% of company.

made it private.

Sold London route.

So, how can someone with 20% make a company private? And how can someone having his shares bought back after company went private still command it to sell anything?

Was he ceo all along?

I don't know the details but from the description he'll have done through the form of a leveraged buyout.

Icahn secures a loan from a bank (or group of banks/financiers - possibly even one of his other companies, I don't know what the law is like in this regard in America) to purchase enough shares to take the company private.

Here's the 'trick' though. That loan is not secured by Icahn, it is secured by the company he has just "bought out" - the repayments of the loan being secured against the companies current capital assets and future profits. In effect Icahn gets the company to take out a loan which he uses to take control of the company.

Obviously there needs to be enough shareholders willing to sell for this to work but if the leveraged buyout offers a great enough premium then they'll normally find enough willing sellers.

The sketchiest thing about Andreeson is that he sits on the board of directors for HP... and at no point has he told investors that it's a rudderless shell of it's former self with almost no hope.

andreesen and icahn deserve each other.

I love Marc and understand he's upset about the accusations, but it's time to move on. Nobody who knows anything about Marc takes them seriously. I'm obviously not privy to what goes on in eBay's boardroom, but the notion of Marc being some svengali forcing them to cede him 100s of millions is blatantly ludicrous, not to mention insulting to the other board members. If I were Marc (and it's probably much easier to say this since I'm not) I'd just ignore.

I kind of find fault with pmarca recusing himself from the eBay board during the skype deal in spite of his conflict of interest, as he's clearly 100x more intelligent than anyone else on the eBay board. I'd rather have a smart guy who has particular knowledge advocating for my interests, even if he has some biases which he discloses, rather than some former CEOs of eBay (not exactly winners there) or some big dumb fund people, which is what you're left with otherwise.

Is there any positive perspective on this guy too? In this interview (http://www.youtube.com/watch?v=CTIp9ebXAh0) he kind of makes sense with `restructure to concentrate on shareholder value` and `restructure for short term or sure profits` line of thinking...

I'd like to see Marc be a bit more vicious about this, starting with Herbalife as the first target.

Dear Marc:

Who gives a rats ass what Carl Icahn thinks? Stop paying so much damn attention to him.

You're leaving me the impression that what he is saying is actually applicable. If it is, get to the point. Otherwise, move on....this story is getting old.

I like this guy's writing. The multiple ellipses every 3 sentences bothers me.

I hope the folks at Apple are paying attention.

Why? I thought Icahn threw in the towel on that crusade.

Maybe he should buy Microsoft.

If you want to see the face of capitalism, look to Carl Icahn.

That's not capitalism, that's greed. Sadly, many of the greedy are hiding behind the banner of capitalism, but don't be confused.

It's exactly capitalism. Carl Icahn, capitalist, used capital to establish control over TWA and, having done so, exercised his property rights in a way to maximize profit and return.

I don't disagree that Carl Icahn is a capitalist, so are Warren Buffett and Marc Andreesen (now).

Look at the definition of capitalism "an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state."

Nowhere in the definition does it state that a capitalist must be a greedy ahole who destroys companies and the lives of employees in order to fill his own pockets.

Sadly, we see too many examples of this, but it isn't capitalism, and we need a better label for it, or we risk throwing the baby out with the bath water.


Capitalism gives people the ability to be driven by generally selfish factors, but there is a line between selfish motivation and greed.

Unfortunately that line is more of a moral one which can make it harder to define.

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