The saga of the last year or so could never really end as simply as AmTrust returning quietly to private ownership, could it? 

After 12 months in which the firm has had to grapple with its deteriorating financial performance, investigations by regulators and the unwelcomed attention of short sellers, the end to this most torrid period seemed to be nearing a close after the majority shareholder Karfunkel/Zyskind family struck a deal with private equity firm Stone Point to remove the company from the glare of public markets.

Despite the vocal dissent of a portion of its investors - who believe that the $13.50 takeout price doesn’t represent the true value of the carrier after a year in which its share price has tanked by more than half - the hegemony of the Karfunkel/Zyskind clan and the backing of Stone Point appeared to be enough to get the deal over the line.

Carl Icahn has turned that entire dynamic on its head with the revelation late last week that he purchased a 9.4 percent stake in the company worth some $242mn in a move aimed squarely at preventing what he called CEO Barry Zyskind and co’s “blatantly taking advantage” of minority shareholders.

In a public letter to the firm the activist investor hung the logic of his play on the hook of concern for the rights of those minority shareholders, claiming that it had failed to treat these investors fairly “both in terms of process and price”.

This pretence was underscored by his highlighting of AmTrust’s decision to “stealthily” set a record date of 5 April for the deal - meaning those investors which had bought up the shares last month would be unable to vote on the 4 June proposal to take the firm private.

Then yesterday the investor upped the ante further- filing a lawsuit against both the management and company in Delaware aimed at contesting the deal price on the basis that it “undervalues the company and is happening at the wrong price and at the wrong time”.

But Icahn’s logic for taking on the Karfunkel/Zyskind family isn’t just about his stated concern for his fellow investors- there lies a serious opportunity for returns from this move.

And as AmTrust’s shares jumped nearly 3 percent on Friday when the letter was released to $13.76 - above the offer price - it became clear that more than a few investors share his optimism.

Privacy concerns 

AmTrust’s attempt to remove itself from the spotlight of its Nasdaq listing comes after probably the roughest 12 months the company has encountered in its time as a publicly traded stock.

Its shares have continually shed value since early last year when concerns over its accounting practices and auditors arose, dropping from nearly $30 to as low as $9 as investor concern over the investigations was compounded by its struggling financial performance.

For the full year 2017 the carrier ran a combined ratio of 113 percent , a climb of almost 20 percent from the prior year, with the poor underwriting performance contributing to a $334.9mn loss for the period.  The results were also delayed after it wrote to the SEC to ask for a filing extension citing “material weaknesses” in internal controls. 

That included $419mn of reserve strengthening last year, which AmTrust warned may not be the end of its reserving woes.

Amid all this, a decision was taken at some time by the Karfunkel/ Zyskinds that enough was enough and the firm needed to return to private ownership to deal with its dirty laundry away from the attentions of public markets.

Among those it may have wanted to escape were short sellers - up until the go-private deal was announced in March, such investors accounted for over 10 percent of the company’s outstanding shares, drawing the ire of management. 

But despite the objections of some investors - who believe the deal doesn’t represent the firm’s fair value - the Stone Point agreement seemed to be on the verge of passing the 4 June vote without much drama. 

That was until Carl Icahn decided to show up.

The arrival of an activist investor with substantial financial clout and public profile tips the advantage back in favour of the minority shareholders, who have thus far lacked a coherent message of opposition or a focal point for organisation. That is why Central Europe-based Arca Capital, which holds 2.4 percent of the shares and is also opposed to the deal, lined up behind Icahn’s campaign yesterday afternoon so swiftly.

And Icahn has gone beyond simply buying up a stake and asking other minority shareholders to vote alongside him - he has also launched a request to AmTrust under Section 220 of Delaware corporate law which could grant it access to the firm’s underlying financial information.

However that decision falls could be critical to Icahn’s plan in this situation - should new information emerge from that lawsuit, it could aid the claims of those who believe the $13.50 takeout offer materially undervalued the company, opening the door to have the deal reassessed fully by the court.

AmTrust, on the other hand, show no signs of backing down- in a letter to his employees Zyskind said that the deal remained on track to close and reiterated his belief that it “delivers immediate and certain value for public shareholders at a significant premium and is in their best interest”.

Overall, this is a classic play by the veteran activist investor Icahn.

Besides the tempting narrative that AmTrust is attempting to bolt to safety, the company’s poor public profile over the last year and its struggling financial performance make it a prime target for an investor like Icahn to take advantage of the dissatisfaction of its other investors to push up any deal price.

Whether he will be more successful in this latest foray into the insurance industry than his ill-fated voyage with AIG remains to be seen.

But expect a lot more twists and turns in this segment of AmTrust’s ongoing battle to remediate its fortunes.