Shares gave up about half their gains after the rumor was dispelled.
Icahn has been fighting to block Michael Dell from buying back the company he founded.
Earlier Friday, Dell's special committee approved an increased buyout price from Michael Dell and Silver Lake Partners: $13.75 a share plus a 13 cent dividend and a dividend of 8 cents in the third quarter.
(Read More: Dell sets buyout deal with Michael Dell)
Dell's shares have spiked by more than 5 percent since word of the agreement surfaced.