Carl Icahn (Trades, Portfolio) continues to bottom feed for companies faltering under weak commodity prices, today disclosing an 88 million-share stake in mining and oil company Freeport McMoRan (FCX, Financial) that gives him 8.46% interest in the company.
Icahn built the stake through various transactions beginning July 17, dating the regulatory filing for Aug. 17. The company’s shares declined 72% in the past year and trade around $10.19 Thursday, up 28.7% on Icahn’s announcement.
Icahn bought the company “in the belief that the shares were undervalued,” he said in the filing. Inevitably, he will push Freeport for changes in the company’s capital expenditures, executive compensation practices and capital structure. He would also discuss “curtailment of the Issuer’s high-cost production operations,” he said.
No discussions between Icahn and the company’s board had occurred as of Aug. 26.
Gold miners have been battered in recent months as gold prices declined. The S&P Metals and Mining ETF (XME, Financial) was cut in half over the past year and dropped 34% year to date. Copper also adversely impacted the company’s bottom line, falling to a six-year low during the third quarter of 2015.
“FCX maintains an open dialogue with our shareholders and welcomes constructive input toward our common goal of enhancing shareholder value,” Freeport said in a statement in response to Icahn’s advance.
“Earlier today, FCX announced revised capital and operating plans in response to the recent decline in commodity prices resulting in reduced capital expenditures, lower production levels and lower operating, administrative and exploration costs. Today’s actions, along with the August 5, 2015 announcement of reduced oil and gas capital expenditures, are the results of the previously announced review of operating plans.”
Freeport is an $8.13 billion market cap company with assets in Indonesia, the Americas and the Democratic Republic of the Congo. It also owns oil and natural gas assets in the U.S.
The company reported a second quarter net loss of $1.85 billion, or $1.78 per share, after net income of $482 million or 46 cents per share in second quarter 2014. Revenues totaled $4.25 billion, down from $5.52 billion, and cash on the balance sheet stood at $466 million, versus $1.46 billion in the second quarter last year. The company’s consolidated debt ended the second quarter at $20.9 billion.
Meanwhile, Freeport’s P/B ratio dropped to a five-year low of 0.72, as did its P/S ratio at 0.52.
Icahn also took an 8.2% stake in oil and gas company Cheniere Energy Inc. (LNG, Financial) in the second quarter where his two nominees will become board members, he announced this week via Twitter.
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