Activist Carl Icahn Takes Stakes in Allergan, Herc Holdings, Slashes PayPal Position

Billionaire Carl Icahn of Icahn Capital L.P. is considered the godfather of activist investors, so his moves and comments tend to send shockwaves across financial markets on some occasions. As equity markets have become too efficient due to the proliferation of high-frequency trading in recent years, the idea of simply taking advantage of pricing discrepancies does not seem to be working as it used to. Instead of speculating about future performance, activist investors such as Carl Icahn are attempting to change future performance.

Carl Celian Icahn, the son of a singer and a teacher, was brought up in a hardscrabble neighborhood of Queens, New York. Mr. Icahn usually approaches target companies with a high degree of aggression and disdain, which might have earned him the title of the most feared activist on the shareholder activism arena. Although Carl Icahn keeps shaking up companies through his brand style of activist investing, his firm’s performance has not been good in recent months. His portfolio of investments includes companies from a wide range of sectors, including several energy companies that seriously hit his portfolio in recent months. Without further ado, let’s summarize Mr. Icahn’s most noteworthy moves completed during the second quarter of 2016.

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Herc Holdings Inc. (NYSE:HRI)

– Shares Owned by Icahn Capital L.P. (as of June 30): 4.31 Million

– Value of Icahn Capital L.P.’s Holding (as of June 30): $148.36 Million

Carl Icahn had a new stake of 4.31 million shares of Herc Holdings Inc. (NYSE:HRI) in his firm’s portfolio at the end of the June quarter, valued at $148.36 million on June 30. The position accounted for 0.7% of the activist firm’s entire portfolio. In late June, Hertz Global Holdings completed the separation of the car rental business and equipment rental business into two publicly traded companies, with Herc Holdings being the company that manages the business of renting equipment. Herc Rentals operates approximately 280 company-operated branches, predominantly located in North America, which generated revenues of nearly $1.7 billion in 2015. The shares of the former Hertz Global Holdings, known as Herc Holdings Inc. post spin-off, were adjusted for a 1-for-15 reverse stock split. As a result, a shareholder of the former Hertz Global Holdings with 15 shares ended up with three shares in the car-rental business (Hertz Rental Car Holding Company) and one share in the equipment-rental business. Jason Karp’s Tourbillon Capital Partners owns 3.30 million shares of Herc Holdings Inc. (NYSE:HRI) as of June 30.

Nuance Communications Inc. (NASDAQ:NUAN)

– Shares Owned by Icahn Capital L.P. (as of June 30): 21.65 Million

– Value of Icahn Capital L.P.’s Holding (as of June 30): $338.45 Million

The activist investor trimmed his firm’s exposure to Nuance Communications Inc. (NASDAQ:NUAN) by 8.41 million shares during the April-to-June period, having finished the second quarter with 21.65 million shares valued at $338.45 million. The provider of voice recognition solutions and natural language understanding technologies has lost 24% of its market value since the beginning of 2016. Nuance Communications reported total revenues of $1.44 billion for the nine months that ended June 30, up $15.7 million year-on-year. The company’s net new bookings at the end of the June quarter decreased by 25.0% year-over-year to $362.9 million, mainly due to a significant, one-time automotive contract won in the June quarter of 2015. The were 33 hedge funds followed by Insider Monkey with stakes in Nuance at the end of the March quarter, amassing nearly 16% of the company’s total number of outstanding shares. Ken Griffin’s Citadel Advisors LLC reported owning 3.15 million shares of Nuance Communications Inc. (NASDAQ:NUAN) through the latest round of 13Fs.

Hertz Global Holdings Inc. (NYSE:HTZ)

– Shares Owned by Icahn Capital L.P. (as of June 30): 4.31 Million

– Value of Icahn Capital L.P.’s Holding (as of June 30): $569.30 Million

Billionaire Carl Icahn owned 4.31 million shares of Hertz Global Holdings Inc. (NYSE:HTZ) at the end of June, which were valued at $569.30 million on June 30. As already mentioned, Hertz Global Holdings recently completed the separation of its car rental business and equipment rental business into two separate companies. Hertz Rental Car Holding Company, which comprised the rental-car business, changed its name to Hertz Global Holdings upon closing. Shareholders of the former Hertz Global Holdings received shares in Hertz Rental Car Holding Company at a rate of one share for every five shares of the old Hertz Global Holdings. Assuming Carl Icahn did not adjust his 21.24 million-share stake in the old Hertz Global Holding, which he owned on March 31, he should have remained with 4.25 million shares of the rental-car business following the spin-off. Hence, it appears that the billionaire activist investor did not slash its stake in Hertz Global Holdings as many media reports suggested, but he did acquire more shares of Herc Holdings Inc. (NYSE:HRI) following the spin-off (he was supposed to have around 1.42 million shares of Herc after the spin-off). Jim Simons’ Renaissance Technologies has 2.01 million shares of Hertz Global Holdings Inc. (NYSE:HTZ) among its holdings as of the end of the second quarter.

Allergan plc (NYSE:AGN)

– Shares Owned by Icahn Capital L.P. (as of June 30): 3.40 Million

– Value of Icahn Capital L.P.’s Holding (as of June 30): $785.71 Million

Mr. Icahn’s investment firm acquired a new stake of 3.40 million shares of Allergan plc (NYSE:AGN) during the three months ended June 30, valued at $785.71 million. The position made up 3.9% of Mr. Icahn’s overall portfolio. The pharmaceutical company has seen its stock plunge by 18% since the beginning of 2016, as U.S. drug maker Pfizer Inc. (NYSE:PFE) decided to terminate its $160 billion-agreement to acquire the Botox marker due to new anti-inversion rules. Just recently, analysts at Credit Suisse compiled a list of top picks in the pharmaceutical space, as well as ran a bull and bear scenario for each firm. The second top pick among Credit Suisse’s outperform-rated pharma stocks was Allergan, citing optimism around recently-launched products and late-stage pipeline. Interestingly enough, Credit Suisse’s bearish case for Allergan assigns a zero-dollar value to the company’s pipeline and yields a massive discounted cash flow valuation of $200 per share. Hence, it appears that Allergan has limited downside and huge upside due to its strong late-stage pipeline. Dan Loeb’s Third Point LLC was the owner of 4.90 million shares of Allergan plc (NYSE:AGN) at the end of the second quarter.

Paypal Holdings Inc. (NASDAQ:PYPL)

– Shares Owned by Icahn Capital L.P. (as of June 30): 33.90 Million

– Value of Icahn Capital L.P.’s Holding (as of June 30): $1.24 Billion

Paypal Holdings Inc. (NASDAQ:PYPL) was the third-largest holding in Carl Icahn’s set of positions at the end of the June quarter, accounting for 6.1% of the equity portfolio value. Mr. Icahn cut its PayPal position by 3.93 million shares during the second quarter to 33.90 million shares. The position was valued at $1.24 billion on June 30. Just recently, the internet payments pioneer inked a partnership agreement with global payments technology company Visa Inc. (NYSE:V) under which PayPal’s long-running fight to steer customers away from using Visa and other cards was capitulated. As a result, the credit-card company agreed not to increase fees to PayPal, as well as offer PayPal users access to Visa’s contactless payments points across the nation. PayPal Holdings has seen its stock gain 6% since the start of the year. Kerr Neilson’s Platinum Asset Management owns 7.25 million shares of Paypal Holdings Inc. (NASDAQ:PYPL) as of June 30.

Disclosure: None