Icahn Should Hang It Up: Activist

The biggest thing taking up Icahn's time these days is an investment in CIT(CIT Quote). Some are reporting that he will become the biggest shareholder of the company under reorganization. Creditors will decide by Oct. 29 whether to push the company into bankruptcy or accept an offer to refinance its debt. Icahn wants the company to refinance its debt through him, saying the fees he'd collect from the company would be less than the other offer on the table.

Icahn likes buying up debt and bringing companies through the bankruptcy process. He followed a similar path to the one he's on with CIT at XO Holdings(XOHO Quote). In that instance, he effectively gained control of the company as a large debt-to-equity owner.

But he's being sued right now by R2 Investments, an 8.8% holder in XO. R2 contends Icahn turned down at least one buyout bid for the company higher than its then share price in favor of refinancing its debt by purchasing $780 million of preferred stock. In doing so and gaining 80% control of XO, R2 alleges Icahn was able to use the company's losses to offset taxes he would have otherwise had to pay on other businesses he owned. XO, which was trading at $1.27 at the time of the buyout offer that R2 says Icahn turned down, is now trading at $0.77 - a 39% decline.

Besides recent poor investments in Blockbuster(BBI Quote), Telik(TELK Quote), and Guaranty Financial(GFGFQ Quote), his entire Yahoo! foray since last year has been an unqualified failure. It will make future activist campaigns he launches more difficult to execute.