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Bloomberg News revealed the news on Friday: Carl Icahn has acquired a sizeable stake in Caesars Entertainment. Caesars’ stock skyrocketed following this statement, proving the effectiveness of the infamous “Icahn Lift.”
Retail investors frequently match Icahn’s large investments in a stock, which raises the price of the stock. Existing shareholders gain from this phenomena, sometimes referred to as the “Icahn Lift,” while corporate management may get uneasy. Icahn has been an activist investor for more than 40 years, and he has profited billions from his calculated actions, frequently at the expense of the businesses he targets. Trans World Airlines, which he led into bankruptcy after taking it private in 1988, is one such example. Icahn took on more than $500 million in debt for TWA, keeping $469 million for himself, from which the airline never fully recovered.
Even when not raiding companies, Icahn can create enough turmoil to force companies to pay him to leave, a tactic known as greenmailing. However, given their successful past collaboration, Caesars Entertainment may view his investment more positively this time.
Icahn previously held shares in Caesars and played a crucial role in its merger with Eldorado Resorts. Despite the challenging circumstances of the pandemic, which saw casinos closed and banks reluctant to lend, Icahn’s persistence ensured the deal closed in July 2020. Eldorado made its bid in June 2019, and by the deal’s closure, the pandemic had significantly impacted the industry. Nonetheless, the merger proceeded, showcasing Icahn’s strategic influence.
Icahn maintains that his current investment in Caesars is not intended to be disruptive. “There’s absolutely no activism contemplated in Caesars,” he told Bloomberg. “A number of years ago we were instrumental in putting Caesars and Eldorado together. Our opinion of Tom Reeg as CEO was very high then and continues to be high at this time.”
Before Icahn’s stake became public, Caesars stock had been struggling, down approximately 30% year-to-date. The casino operator’s Q4 2023 earnings had disappointed Wall Street, and Q1 2024 results were similarly underwhelming. The market adage “buy low, sell high” seems apt for Icahn’s move, as his investment came at a critical time for Caesars and its shareholders.
Icahn’s stake may reflect opportunistic timing, aiming to capitalize on Caesars’ current struggles. Regardless, this “Icahn Lift” has provided a much-needed boost to Caesars and reassured its investors.