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Voltari Corp (VLTC): Carl Icahn Stirring Yet Another Pot

In a recent filing with SEC, Carl Icahn of Icahn Capital Lp disclosed an activist stake of 4.74 million shares in Voltari Corp (NASDAQ:VLTC). Nearly 4.06 million shares were purchased at $1.36 per share upon the exercise of basic subscription and oversubscription rights during Voltari’s Rights Offering that expired on March 20. The holding which comprises stakes held by Icahn Capital indirectly through its affiliates, High River Limited Partnership and Hopper Investments, LLC, represents 52.3% of the company’s outstanding common stock.

Hedge Fund Strategies

Voltari Corp (NASDAQ:VLTC) raised about $4.6 million through the recent rights offering, which involved the sale of some 4.3 million shares. The terms of the offering gave shareholders a right to buy 0.9 shares for every share already owned, while shareholders purchasing more than 1.3 million shares had to pay $1.36 per share and others with a smaller order were charged $0.97 per share. The company’s stock is up by nearly 150% in today’s trading session. Another shareholder of Voltari Corp (NASDAQ:VLTC) is Ken Griffin’s Citadel Investment Group, which holds 24,600 shares valued at $17,000 as of the end of 2014.

Carl Icahn is a renowned activist investor with lots of flare as he often creates a stir in the investment world. His fight with Bill Ackman over Herbalife Ltd. (NYSE:HLF) being a pyramid scheme, his valuation of Apple Inc. (NASDAQ:AAPL) stock at $216, and his battle with eBay Inc (NASDAQ:EBAY)’s management regarding the spinoff of PayPal are only some entries on a long list of campaigns he has been involved in. Controversy aside, his investment prowess is never taken lightly and he is well respected among his peers. The market value of his fund’s portfolio stood at $31.90 billion at the end of 2014, with 35% of the holding in the industrials sector and 30% in information technology. Mr. Icahn prefers to invest in large-cap companies, although he still owns positions in companies with smaller market capitalization. Aside from Voltari, which is the smallest company in the investor’s equity portfolio, he also owns shares of the $49 million Enzon Pharmaceuticals Inc (NASDAQ:ENZN) and $212 million Seventy Seven Energy Inc (NYSE:SSE).

Most investors don’t have enough time to do an in-depth analysis on each stock that they want to include in their portfolios. Professional investors, like Carl Icahn, spend weeks conducting due diligence on each company and spend a lot of money on gathering information and paying salaries of Ivy League-educated analysts. That’s why we have always believed that imitating the stock picks of hedge funds and billionaires is an excellent shortcut we can take. We analyzed the historical stock picks of these investors and our research revealed that the small cap picks of hedge funds performed better than both the market and their large-cap picks. A portfolio of 15 most popular small caps among several hedge funds outperformed the S&P 500 Total Return Index by nearly one percentage point per month between 1999 and 2012. The exceptional results of this strategy got even better in the forward tests we have been conducting since the end of August 2012. The most popular small-cap stocks among hedge funds beat the market by more than 79 percentage points since then, returning 132% during the last 2.5 years (see the details here).

Coming back to Enzon Pharmaceuticals Inc (NASDAQ:ENZN), whose stake in Icahn’s equity portfolio remained unchanged during the fourth quarter at 5.9 million shares valued at $6.44 million. The $46.39 million company is currently waiting to be acquired by another concern as it has put brakes on the clinical research and is instead banking on royalty revenues from its drug PegIntron, which is marketed by Merck & Co., Inc. (NYSE:MRK). This makes the company an interesting merger arbitrage opportunity for hedge funds. Billionaire Jim Simmons’ Renaissance Technologies increased its stake in the company by 15% during the fourth quarter to 1.81 million shares.

Icahn initiated a position in Seventy Seven Energy Inc (NYSE:SSE) during the third quarter of 2014 with 4.75 million shares. The stake remained unchanged during the fourth quarter and was valued at $25.68 million at the end of December. The stock is down nearly 80% over the last 52 weeks. Besides the plunge in oil prices owing to oversupply in the commodity market, among other factors, the heavy debt on Seventy Seven’s balance sheet has also played a major role in the stock’s dive.

At the end of the fourth quarter, 15 hedge funds had an aggregate investment of $79.85 million in the oil field services company, versus 18 funds with $332.83 million three months earlier. Jeffrey Altman’s Owl Creek Asset Management owns 2.66 million shares valued at $14.4 million, according to its latest 13F filing.

Disclosure: none

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