Carl Icahn and Xerox

Carl Icahn, another famous activist investor, has helped ‘facilitate’ the splitting of Xerox.  Xerox, as I’m sure many of you know produces printers and other office supplies.  What you probably didn’t know is Xerox has a second market: outsourcing HR, customer care, and accounting services.  This second function is widely overlooked but will soon be it’s own company.

Xerox has had a troubling couple years.  Over the past year Xerox equity has lost approximately 30% of it’s total worth.  And Q3 FY2015 revenue decreased almost 10% from the previous year.

The basics of the business are strong, specifically the photocopying and technology division of Xerox.  That being said, investors have had little to no confidence that the company can meet it’s targets.  Xerox closed at $9.75/share on Friday.

Where does Carl Icahn fit into all of this?

Carl Icahn, if you aren’t aware, is a billionaire activist investor.  Most recently Carl bought a large stake in the internet auction service Ebay ($EBAY) and spun off the online payment company Paypal ($PYPL).  The resulting 18.3% drop in Ebay stock and 6.7% drop in Paypal equity shocked the investing world, however Carl Icahn insists that both companies are stronger than they’ve ever been before.

In November Icahn purchased over 72 million shares of Xerox stock.  Later, this January, Icahn bought additional shares to bring up his grand total to over 92 million shares.  This holding represents an 8.1% stake in the company and means that Mr. Icahn is the largest shareholder of the company.

Current CEO of Xerox Ursula Burns stated that “What’s been reported is that this was driven by Mr. Icahn, Interestingly enough, it was not. The board did its analysis and came to its conclusion without speaking to Mr. Icahn at all. Fortunately, when we did speak to him – as you know he is a large holder of our shares – he agreed with the outcome that we reached.”

Carl Icahn has been granted three spots on the board of directors for the new business services company and the ability to appoint an advisor to the CEO search committee.  Overall Carl is involved in the splitting of Xerox, however what is being reported is not exactly the truth.  Carl is not facilitating or bridging the gap to a new era of Xerox, but more receiving the benefits of a split of a struggling company.  That being said, his position as largest shareholder does give him a louder voice than other investors.

We have yet to see if this split will turn out like Ebay and Paypal, or if Xerox will flourish under new management and structure.  The split of Xerox is set to be completed by the end of 2016.

I hope you’ve found this useful!  If you have any questions or comments, feel free to leave them below (we love hearing from you guys), or email me personally at David.Coleman@Collegeinvestr.com.  Thanks for reading!


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