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Icahn Exercises Option And Buys 9.4% Stake In Family Dollar

The outside of a Family Dollar store.
The outside of a Family Dollar store.

Billionaire activist investor Carl Icahn Wednesday exercised his stock options and became Family Dollar’s largest shareholder. The stock price for the Matthews-based company has gone up 8 percent since Icahn started pushing for a sale.

Icahn announced about a month ago that he had bought the stock options. Since then, he’s called on Family Dollar’s board to sell the company because it’s under-performing its competitors. In response, the board enacted a poison pill to prevent any one shareholder from buying more than a 10 percent stake. Icahn’s 9.4 percent share of Family Dollar is worth about $700 million. On paper, he’s made more than $80 million.

Bloomberg news reporter Beth Jinks says companies’ stock prices often go up after activist investors get involved—even when they’re not successful at breaking up or selling the company. Her analysis of companies targeted by activist investors between 2009 and 2013 shows the companies’ stocks beat the S&P 500 by about 17 percent. But she says Icahn is different from most activist investors.

"It’s his own money that he’s using; he’s not relying on other people’s money, as many of the other funds do," she says.

"So he, in theory, can sit on an investment indefinitely and continue to advocate for change until he gets what he wants."

Jinks says stocks of companies Icahn targets tend to go up immediately, perform better and maintain those gains more than stocks other funds get involved with. Family Dollar’s stock jumped from around $60 to nearly $70 a share after Icahn made his announcement in June.

Icahn has demanded Family Dollar put three of his representatives on the company’s board, or he says he will take his plan to sell the company directly to shareholders.