Understanding Carl Icahn’s Clorox Stake

Billionaire investor Carl Icahn, founder of securities firm Icahn Enterprises, revealed that he has taken a 9.08% stake in Clorox Co. and is seeking to speak with the company’s management to discuss the companies future. Since many of the billionaire investor’s other stakes have become undervalued recently, Carl Icahn has started loading up on shares of Clorox to compensate. Icahn has purchased 1 million shares of Clorox common stock at $66.35 apiece and has obtained options to purchase another 11.5 million shares at the undervalued rate of $41 each. According to filing data, Carl Icahn of Icahn Enterprises has shares are only profitable above $63.38 a share.

The Clorox Company, which has several large household brands from Hidden Valley Ranch, Clorox bleach to Kingsford charcoal has been declared undervalued by Carl Icahn. Currently, Clorox is getting $.20 on the dollar of profit before interest and taxes; much more than any other household products maker. Shares of the company have dropped significantly since Carl Icahn’s disclosure of his stake since the billionaire has a reputation for pushing businesses to sell or break-up of brands.

Billionaire Carl Icahn of Icahn Enterprises is known as a market activist. Icahn Enterprises tries to effect change by finding companies that have more value than is currently held in stock price. Speculation by other market players places a leveraged buyout price of Clorox at $70 to $72 a share. Icahn Enterprises does not purchase businesses itself, but pushes businesses to either break up to leverage equity or be bought out by other competitors for a cash payout to stockholders.

Fear and speculation following the billionaire’s disclosure have caused the Clorox stock to fall 6.2% based on the reputation of Carl Icahn and Icahn Enterprises. UBS analyst Nik Modi disclosed that Icahn’s investments are either companies that should be broken up, companies that are candidates to be bought by or merged into other companies or companies that show room for improvement. Since Clorox’s brand portfolio currently consists of more than 50 products, analysts predict it would be hard to push a full sale of the company. Since billionaire Carl Icahn and Icahn Enterprises tends to only invest in companies where there is extra value, he can be the key in getting a takeover bid for a company.

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