With just two tweets, Carl Icahn raised the value of the Apple empire by $17 billion. That's $8.5 billion per tweet, and about $62 million per character -- including spaces.
But it wasn't just Tim Cook and company that came out ahead when Icahn used Twitter to reveal his "large position" in Apple earlier this week. With those two tweets, the billionaire investor -- one of the biggest names on Wall Street -- also gave himself an enormous boost. That large position was instantly transformed.
At first, to those outside the Wall Street game, it didn't seem right that one man could so easily raise the value of his own stock holdings. But the reality is that Icahn's play isn't all that different from the way Wall Street has always worked. It was just quicker and more direct and more, well, personal. With those two tweets, Icahn was simply taking an old game to a new level. It wasn't illegal or even unethical. It was shrewd. And it's sure to become the new normal on Wall Street.
>'There are plenty of people who like to tout their own positions, and as long as they're not misinforming the public, there's nothing wrong with that. There's no grievous ethical lapses in him using modern communication tools to get his message out.'
James Angel
In Wall Street parlance, Icahn was talking his own book. "There are plenty of people who like to tout their own positions, and as long as they're not misinforming the public, there's nothing wrong with that," says James Angel, an associate professor of finance at Georgetown's McDonough School of Business who specializes in the structure and regulation of the financial markets. "There's no grievous ethical lapses in him using modern communication tools to get his message out."
Indeed, the Securities and Exchange Commission has recently said that companies can use social media to disclose financial information -- provided they warn investors that it might happen. Icahn's investment outfit, Icahn Enterprises, did warn the market, saying -- in a notice filed with the SEC a day earlier -- that he intended to "use Twitter from time to time to communicate with the public about our company and other issues."
And even that may not have been necessary. With his Tuesday afternoon tweets, the only thing Icahn revealed about his own company is that it owns some Apple stock. You could argue that such a basic disclosure didn't require formal notice with the SEC.
Even one of the most conspicuous crusaders against misbehavior on Wall Street, Overstock.com CEO Patrick Byrne, doesn't see a problem. "It is standard practice for such guys to talk their book," Byrne says. "If that is OK, which it always has been, then Twitter [just] makes it easier," he says. "[It] is not fouler."
No, the tweets weren't foul. They were clever. Icahn Enterprises chief accounting officer Peter Reck declined to discuss the tweets, saying the company was in the middle of a financial restatement, but the company's intentions are obvious. The tweets were carefully calculated to make Icahn an awful lot of money. But it wasn't about the short term. He's playing the long game.
Yes, he could've made a bundle simply by tweeting what he did and then dumping his shares. But that would bring down the wrath of the SEC. Icahn is operating in subtler ways, with an eye toward a much bigger payday. With his second tweet, he told the world about a private meeting with Tim Cook in which they'd discussed the possibility of Apple buying back a large chunk of its shares.
He's encouraging investors to buy Apple, but he's also encouraging Apple to act. He wants the company to stop sitting on all that cash it's sitting on. "His action can be seen as putting more pressure on Apple," Angel says. "It brings a lot more addition to the question of whether Apple should give more money back to its shareholders."
Yes, it's a game. But that's Wall Street. What's most interesting about Icahn's play is that he seems to give the impression that Apple will do what he says. If you read his tweets, you're encouraged to buy Apple not only because he's buying Apple, but because he -- the titan of Wall Street -- seems to be pushing the tech giant in a new direction. He says that he and Cook are set to talk again.
>'He is walking a dangerously fine line. It sure looks to me that he is saying, "I spoke with Tim Cook and he agreed that they should be buying back stock." That rumor, coming from anyone credible, will drive up the stock.'
Patrick Byrne
"He is walking a dangerously fine line," Byrne says. "It sure looks to me that he is saying, 'I spoke with Tim Cook and he agreed that they should be buying back stock.' That rumor, coming from anyone credible, will drive up the stock."
He could have spread this rumor in other ways -- in the papers or on television. But he can spread it so much quicker on Twitter -- and spur others into spreading it for him. "It's a very powerful tool because it's unfiltered. Others get your message directly and then many of them will pass it on in the echo-sphere of the internet," Angel says. "Back in the ancient days, everything was filtered -- by the print media or the television media. Even the blogosphere is a kind of filter."
"[Twitter] is not the biggest game changer in history. But it adds another communication tool that can be very useful to the likes of Mr. Icahn."
Indeed it can.
You could even argue that Icahn's disclosure to the SEC wasn't really a disclosure. In hindsight, it looks more like a way to underline the importance of his tweets, of giving them even more weight than they would have otherwise had. As columnist John Shinal suggests, Icahn was almost announcing that Twitter had replaced the good old-fashioned financial news wire.
Forget Bloomberg and Thomson Reuters and Dow Jones. The only reason to use the wires is if you want fewer people to notice. If you want to move the market, use Twitter.
