WebMD $WBMD Off the Market, Icahn Soros Have Large Stakes

WebMD (WBMD) was a top pick for several big-time hedge fund managers in the third quarter. Looking at the list of hedge funds that initiated new positions or increased holdings is a virtual “Who’s Who” of some of the top names in the hedge fund industry.

Carl Icahn’s Icahn Capital Lp had a new position in the company worth over $65.70 million at the end of September and Icahn wasn’t the only hedge fund manager to be bullish about WBMD. Michael Lowenstien’s Kensico Capital upped its stake in the company by +184% to $173.95 million in the third quarter, while Jim Simons’ Renaissance Technologies raised its position by +128% to $23.41 million. Steve Cohen’s Sac Capital Advisors, Joel Greenblatt’s Gotham Asset Management and Ken Griffin’s Citadel Investment Group each increased their holdings in the company. George Soros’ Soros Fund Management recently filed a 13G for events of December 31 in which stated that it owned over 3.72 million shares in WBMD, or 6.14% stake in the company.

Of course, that doesn’t mean that the relationship between WBMD and hedge funds has been an easy one.

The intense interest in the company seems to have worried WBMD to the point that it adopted a “poison pill” early in the fourth quarter that capped investors from owning any more than 12 percent of the company, a move designed to prevent  takeover attempts. Then, on November 30, 2011, Ichan filed a 13D (read it here) saying that it did not support WBMD’s decision to sell part of itself to a private equity acquirer, and instead suggested that it use cash on hand to repurchase up to $1 billion of its outstanding shares. WBMD had its own plans.

Ultimately, the company put itself on the auction block, entertaining discussions with several potential buyers, but to no avail. Yesterday, the New York Times reported that WBMD planned to remain independent and it was officially taking down its “for-sale” sign. The news caused the company’s share price to fall from $36.73 at close on January 9 to $26.25 at close on January 10. The stock is currently trading at $26.26 a share. WBMD was trading over $58 a share in February last year. Analysts give the stock a mean one-year target estimate of $30.80 (range $25-$40).

There is enough hedge fund interest from people like Icahn and Soros who actively try to improve shareholder value that something will happen with WBMD soon. Of course, only time will tell what happens next, but there could be big changes in store for the company. When WBMD said it would not be selling, it also announced that its chief executive, Wayne T. Gattinella, had resigned. He is being succeeded on an interim basis by Anthony Vuolo, WBMD’s CFO, while the board looks for a permanent successor.