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Circle Of Competence Issue #25

Quote of the week: "Mimicking the herd invites regression to the mean." Charlie Munger


This week I wanted to update on a couple of interesting activist positions I have been following as well as a new Icahn proxy fight with Cigna.

Sandridge Energy

First, an update on Icahn's Sandridge Energy position. Back in June & July, Icahn waged a successful proxy fight against Sandridge at its annual meeting, gaining enough seats on the board to push for an acceleration of its strategic review and potential sale of the company. Fast forward to this week, and it seems that Midstates is in talks to buy some of the company's assets (Yahoo Finance). This could result in significant portions of assets on the books being realized for shareholders at market values above what the stock price currently suggests they are worth. Midstates made a stock-for-stock bid for Sandridge's business, which was rejected earlier this year. For a more thorough understanding of the entire saga, I have linked to Icahn's letters/presentations in chronological order:

Letter 1: open letter to shareholders

Presentation on Sandridge

Letter 2: open letter to shareholders

Letter 3: open letter to shareholders

Letter 4: statement regarding Sandridge Energy

Letter 5: open letter to shareholders

Letter 6: open letter to Sandridge Energy Board of Directors

Letter 7: open letter to shareholders