Six months after the failed tilt at HP, activist investor Carl Icahn has bought another 1.8 million Xerox shares at an average price of USD$16.31, and sold out of HP.

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 "Bullish activity" detected in Xerox trading, but even bulls need to wear Covid masks! (Getty Image)

 

Through his investment vehicle Icahn Capital Management, the Wall Street maven has this month upped his stake in Xerox by 7.7%, taking it to a total of 11.86%, easily the largest shareholder at 25.26 million shares held. To put the size of Icahn’s investment business into perspective; the Xerox stake represents only 2.29% of his total assets under management. By August 18th, Icahn had exited his HP stake of around 63 million shares, worth around USD$1.1 billion, with an estimated loss of 18.89% on the original investment in 2019.

However, analysts in New York calculate that Mr Icahn’s total Xerox investment has lost around one-third of its value since 2015. Buying more shares at USD$16.31 is a shrewd move as it is very near the lowest trading figure for Xerox stock since hitting a high of USD$39.47 following the aborted Fujifilm take-over offer and the audacious, but Covid-stymied, $35 billion thrust to buy HP.

Carl Icahn
Carl Icahn still believes in Xerox

Most analysts agree that Xerox stock is undervalued and Icahn’s buy pushed the price up to USD$18.21 at close of trading yesterday. After-hours trades were pushing it even higher. Nevertheless, Xerox remains third in a list of 20 ‘worst performing stocks during Covid-19’ according to Marketwatch – with a 2020 drop in value of -54.5%.

It’s all making the blocked 2018 Fujifilm $6.1 billion offer look like an opportunity lost. Although a complex deal, it valued Xerox at around USD$32 per share and also served to offload what many Wall Street analysts perceived as a ‘dinosaur’ company, to a well-funded Japanese multinational with a track record of sticking with legacy, unfashionable technologies (silver halide photo-chemistry eg), investing in them and making them profitable. Some call it the ‘last man standing’ strategy; profits can increase in declining markets.

As Covid-19 eases, Xerox’ performance will no doubt improve – it will be an interesting ride to see what happens next.

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