June 15, 2016

Did Carl Icahn "pump and dump" Apple shares

Jim Cramer has a good piece on those who say the government should view Carl Icahn's well-publicized purchase and subsequent sale of Apple (AAPL) as a "pump-and-dump" scheme.

According to Cramer...
"Did Carl Icahn launch the biggest pump-and-dump scheme in history with lauding of Apple in the low $50s and his selling of it in the high $90s, two years later after saying it was a "no brainer" when he bought the stock? Should he be investigated for urging a buyback in multiple tweets and letters to Apple, and then selling the stock for a $2 billion profit after he got his wish? 

Now, you may not like what happened here. I am not crazy about it. But Icahn had no inside information. He did not say on air that he was buying when he was actually selling -- which is the definition of a pump and dump. He wasn't managing your money. You have to do that. And he didn't get you into a loser. He got you into a winner. If you had bought when he first said "buy" and sold when you learned he sold, you did fabulously.

Those are all good things.

I think the anger here comes from those who didn't do their own homework, thought he loved it all the way up to the $130's -- where I am sure he wished he had sold but he didn't -- and bought it well above where he first liked the stock." - Jim Cramer

I agree Jim -- caveat emptor, a major precept in the investment business.

Here are excerpts from two columns that I wrote recently in which I discussed Icahn's Apple moves:

"It is disturbing how so many who readily are given a media platform so quickly forget and discard discussions in the stocks or in the arguments that no longer conform to their point of view or outlook. They just seem to move on with a changing narrative. ...

Today, talking heads are cuckoo for Facebook (FB) , but they conveniently ignore or reference their 'yesterday's Facebooks.'

Facebook's shares have risen by nearly tenfold from a few years ago, and the sound of today's enthusiasm (as if you almost can't lose) is eerily reminiscent of the chorus that we heard regarding Apple in September 2012 and again 15 months ago in early 2015. ...

The reward vs. risk for Facebook is far worse than it was back in 2013, and investors should not forget The Law of Large Numbers and that success creates the largest headwind, and Schumpeter's gale of Creative Destruction as it relates to the last Facebook, Apple.

Post script: As I write this column, Carl Icahn has just announced that he has sold his entire Apple position. Which seems to prove my point. Sic transit Gloria ... and caveat emptor."

-- Doug's Daily Diary, Beware of Changing Narratives and 'No Brainers,' (Apr 28, 2016)


"The fact Carl Icahn states that China is a risk to Apple is not a new factor in evaluating Apple or any other company that does business in China.

I don't buy it, Carl.

And there are no 'No Brainers' either, Carl."

-- Doug's Daily Diary My Two Bits on Icahn's Sale of Apple Stock (April 28, 2016)

Position: Short AAPL