Icahn Hits a Wall

A 10-K filing filed March 2005 shows that at the end of 2004, American Real Estate Partners had a short position of $2.5 million shares in an unnamed bankrupt company now believed to be USG, the only publicly traded wallboard company to declare bankruptcy since at least 1986, according to the Los Angeles Times. USG filed for Chapter 11 in 2001, but plans to emerge from bankruptcy this year.

Certainly a short position in USG would have been a painful one with the stock rising since 2004. However, Icahn has not covered his short at this point, says the source familiar with the matter, which means that the loss is only on paper.

A short-seller borrows shares of a stock and sells them on the expectation the share price will decline and can be purchased later at a lower price. When the stock's price rises instead of dropping, the short-seller loses money because he must purchase the shares at a higher price than he sold them.

When the Bloomberg article was released on Friday, the stock was trading at $102, but dropped since then to around $96, possibly as a result of Icahn publicizing his negative opinion on the sector. USG was recently down 3.8% to $93.

A call to USG was not returned.

Separately, Icahn was in the news Monday when he disclosed the purchase of 2.5 million shares of BJ's Wholesale Club(BJ Quote), boosting the stock price by 4.5% to $30.13. The stock has run up in recent months amid buyout rumors, but was recently down 0.5% to $29.45 after reporting declining quarterly profits.

The regulatory filing Monday also revealed that Icahn has taken new positions in Federated Department Stores (FD Quote), Lear (LEA Quote), Cendant (CD Quote) and Lions Gate Entertaintment (LGF Quote); he has doubled his stake in Tyco International (TYC Quote) and remains heavily invested in Time Warner (TWX Quote) and Blockbuster (BBI Quote).