Icahn's cost basis, which has not been reported before, and his new Dell offer show why the 77-year-old investor is one of the most feared activists in corporate America.
Earlier this week, he urged Dell shareholders to go to court to get a higher price for their shares from Michael Dell. Dell's special board committee as well as legal experts said that strategy was fraught with challenges, such as the risk that the court could decide the shares are worth less than the offer price.
"You know this guy is willing to put up a good fight," said James Cox, a corporate and securities law professor at Duke University School of Law.
Dell faces an uncertain future as sales of personal computers decline steeply and the popularity of tablet computers grows. The company's special committee of the board, which is overseeing the sale process, has repeatedly spurned Icahn's plans to recapitalize Dell and reward shareholders, leaving open the possibility that the shares will plunge if the buyout is voted down. Dell shareholders will vote on the Michael Dell-Silver Lake offer of $13.65 per share on July 18.
(Read More: Dell: Pzena Will Oppose LBO Bid, Calls It 'Unreasonable')
So far the odds are favorable that the Michael Dell-Silver Lake team will win shareholder approval, investors say. All three major advisory shareholder firms this week backed the bid to take Dell private.
Icahn and Southeastern Asset Management Inc on Friday said they sweetened their bid for Dell by adding warrants they say would increase the value of the offer to a range of $15.50 to $18 per share from $14.
Under the new offer, Dell shareholders would receive $14 per share and a warrant for every four shares held. The warrant would entitle the holder to buy Dell shares for $20 each within the next seven years.
Icahn's hope is that arbitrage-loving hedge funds will find the warrants to be attractive pieces of paper to trade. People familiar with the deal estimate that 25 percent to 30 percent of Dell's stock is now owned by such event-driven funds.
For Icahn, whose net worth is pegged by Forbes at $20 billion, Dell has been an uphill struggle from the get-go. But he has managed to turn some of the odds in his favor.
Last month, he lowered the average cost of his stake in Dell by buying 72 million shares for $13.52 each from Southeastern Asset Management Inc, another shareholder that is also backing his cause. Icahn had earlier paid $13.89 each for 73.5 million Dell shares.
The maneuver brought down the cost of his now 8.7 percent stake in Dell to $13.58 per share, including Dell's dividend, which is 7 cents per share below Michael Dell's offer.
He would stand to lose a substantial portion of the $2.07 billion he paid for his stake if Dell shares were to collapse in the event the Michael Dell offer was voted down and he did not succeed in getting his way.
But Icahn is clearly confident that shareholders will back his plan if they decided to vote down the buyout. Icahn has committed more than $3 billion of his wealth toward a $5.2 billion financing package for his share buyback plan. He would have to pay this money only if all 12 of his nominees were appointed to Dell's board.