Everyone recalls the slow motion trainwreck from the afternoon of January 25, when in an epic bitchfest, hedge fund titans Bill Ackman and Carl Icahn screamed at each other telephonically for about an hour on CNBC in what was nothing but one big pissing match. Just over two weeks later, Icahn forced a major squeeze in the stock when as we wrote previously and as we predicted, he disclosed a massive 13% stake, or some 14 million shares in the company built up through stock and calls (essentially costless thanks to Icahn's recent profits on Netflix). What many may not know however, is that for Icahn, the HLF stake was nothing more than a $500 million dollar impulse buy. Why? Because as the chart below, which breaks down the cumulative purchases of HLF stock by various Icahn's funds, shows, the billionaire only held some 1.7 million shares until the January 25 afternoon of his screamfest with Ackman. Then the Monday after the feud Icahn went ballistic, and proceeded to buy some 120,000 shares on Monday and 197,459 option-equivalent shares, after which he tapered off his stock purchases while ramping up the call buys, and buying an epic 10 million share-equivalent calls in the next two weeks, without pause, compassion or remorse, and with just one thought: crush, mangle and destroy Ackman!
Of course, by buying calls instead of stock, Icahn never gave a hint to either markets or dark pools what he was doing (although we commiserate for whoever sold all those calls in bulk as they are now facing tens of millions in margin calls). The other issue is that since Icahn does not control the shares outright, he can't call them in and thus force the "epic squeeze" that would befall the stock if the float was suddenly less than the short interest.
Unless, of course, he and others exercise any of their in the money shares, demanding the physical underlying shares.
But the bigger issue is that the chart above shows for Icahn the HLF purchase is nothing but an escalation of the previous grudge match, with no regard for the fundamentals, and the impulse buy was, paradoxically, driven precisely by Ackman's dare to tender for the company. Because he wants to, and because he can: for Icahn $500 million is literally pocket change.
To loosely paraphrase the Terminator:
That Icahn is out there. He can't be bargained with. He can't be reasoned with. He doesn't feel pity, or remorse, or fear. And he absolutely will not stop, ever, until Ackman is destroyed.
Behold: the Icahnator