Last fall, Icahn purchased a minority stake in WebMD with hopes that he could push for a share buyback around $30 per share. Unfortunately, shares have languished since Icahn made his investment. The company only authorized a $150 million share buyback which is a far cry from the $1 billion that Icahn was pushing for.
The problems at WebMD largely stem from a perceived lack of leadership and fears that the company has an outdated business plan.
First of all, the CEO quit in January 2012 and the shares plunged. Any short-seller will tell you that "C" level resignations are a major red flag for any investor.
The second problem is that pharmaceutical companies have cut back on branded advertising. Major pharma companies like Pfizer (PFE) and Merck (MRK) are dealing with expiring patents and are subsequently lowering their advertising spending.
However, some investors are skeptical of Internet companies that rely on Google searches and advertising dollars. First of all, there is a trend towards using Facebook or Twitter to find information. Secondly, Google will soon roll out semantic search which might eat away at some of WebMD's organic traffic.
Nonetheless, Icahn is purchasing his shares at record low prices and a lot of the bad news is priced in. If he can somehow install a leadership group that a) adapts the business model or b) sells the company, shareholders could be set for big gains.