1. Okay, I am picking up some frustration in your tone from the length of the argument.
Exactly what will happen when you have to bargain with that car dealer in your previous example. You are thinking, why are you wasting valuable time on something that really is a fraction of your net worth. The economist in me would be thinking the marginal cost of my time is not worth whatever benefit I can get out of winning.
2. There are costs to Icahn from your scheme to lower the price of the stock. First , as Cree stated he could be accused of stock manipulation by the Sec. Valuable time is lost which could be used to work on a more lucrative deal worth far more than 5-8 million considering his 20 billion net worth. Like in example #1 , the marginal costs are not worth the marginal benefits.
3. Icahn is highly motivated to increase his net worth, however he is equally interested in being seen as pro shareholder and anti corporate boards that get large pay packages for inferior performance. When he was criticizing Oxy's board , one of the responses I saw was look how lousy your running of another energy company (Sandridge) has been.
4. The next proxy fight Icahn is involved (over much more dollars than his Sandridge position) , the rivals could easily use any manipulation controversy etc.
An example is your suggestion that fake bad news would be leaked , such as waste of money on drilling and then after the warrants expire it would be taken back . The potential damage to his reputation would be countless multiples of the 5-8 million he would gain from the warrants expiring worthless.
5. I never said the exercise of the warrants would make the company more valuable per share!
I said the cash would almost compensate for the dilution. I did say the current cash already on hand would make the company a takeover target , if warrants were about to expire worthless.
6. As an example, suppose Southwest Gas decided to control some of their energy supplies and offered to takeover Sandridge for $50 in stock right before the warrants expired. They would have at least 7 million shares on their side, just for doing that. Adjust the p/e ratios for cash, the deal is quite accretive even with 7 million more shares outstanding. They could then use the 490 million cash they acquired to reduce debt or buy back stock. In the proxy fight with Icahn, you think they might mention Carl's little scheme?
7. Thanks for an interesting and intelligent exchange of views on this subject. One more point. Icahn's interest in Sandridge goes back to his having a business relationship with Tom Ward. He was given shares in the Sandridge Ipo (2007? or 2008). He complained about Ward's over spending at Sandridge and before that at Chesepeke with Aubrey McClendon. There is a discussion about this in the excellent book (The Frackers) by Gregory Zuckerman.
