Carl Icahn, the billionaire activist investor, has previously announced a rights offering for his fund, Icahn Enterprises. A rights offering permits prior shareholders in a company to purchase additional shares of that company's stock in a direct transaction with the company. Shareholders are allowed the option of buying more stock at a rate proportional to their existing stake in the company; the more stock you already own, the more you're permitted to buy at the time of the rights offering. In Icahn's case, the billionaire investor has now revealed that the new price for stock of Icahn Enterprises to shareholders will be $53.71 per share.
Specifics of Rights Offering Made Public
The specifics of the Icahn Enterprises rights offering were made public early this morning and were reported on the NASDAQ website. Icahn enterprises plans to offer rights for additional stock purchase to shareholders as of the close of business today. Shareholders will earn 0.07718 rights per each share of Icahn stock that they already hold. Those shareholders with sufficient positions in Icahn Enterprises will be able to purchase additional shares for each whole right equivalent that they posses in prior stock and at a price of $53.71. At the same time, prior shareholders who earn the right to purchase additional stock will also be "entitled to subscribe for additional depositary units that remain unsubscribed as a result of any unexercised subscription rights," according to NASDAQ. The rights will be distributed on February 9.
$53.71 a Notable Deal
The unit price of $53.71 per share is a substantial discount for shareholders of Icahn Enterprises who possess rights to buy reduced price shares. As of this writing, the cost per share of Icahn Enterprises stock (IEP) is $59.68. NASDAQ reports that Icahn has expected that the shares made available to rights holders will be listed under the same symbol. The rights themselves will also be transferable and are approved to be listed on NASDAQ under the symbol IEPRR, where they can be traded until February 22, at which point the rights offering expires.
Why would a company decide to pursue a rights offering? In some cases, it is because that company is facing significant debt and wishes to gain quick capital to help relieve itself of the burden. Just because a company makes a rights offering does not necessarily mean that it is facing dire financial situations, however. In other cases, managers and business leaders will consider a rights offering as a way of building up capital in order to make major investments or acquisitions. It is not immediately clear why Icahn and his fund would be considering a rights offering in this case. Nonetheless, investors will likely scramble to buy up shares at a reduced rate.