For nearly half a century, Karl Icahn has rocked Wall Street as a corporate predator and activist shareholder, forcing big companies to bow to his demands and change their business strategies.
But on Tuesday, his publicly traded company, Icahn Enterprises, said: hindenburg studiesa short-selling firm that made a name for itself in recent years by taking on Indian tycoon Gautam Adani and Twitter co-founder Jack Dorsey.
Hindenburg accused Icahn Enterprises of being overvalued. The firm trades well above net asset value, unlike similar financial institutions run by William A. Ackman and Daniel S. Loeb. Hindenburg also alleged that the disproportionately large dividend was funded by the sale of shares.
“Icahn is using money from new investors to pay dividends to old investors,” Hindenberg wrote in a public report. It likened Icahn Enterprises to a “Ponzi-like economic structure” that survives only as long as new investors are willing to “hold the bag.” Hindenburg said he was betting that Icahn Enterprises stock would fall and he would make a profit on the transaction.
The company’s stock fell 20% on Tuesday and fell another 20% during Wednesday’s trading.
Hindenburg also cites Jefferies, the only major investment bank to publish a study on Icahn Enterprises, which it also helped sell its stake in.
Icahn Enterprises responded that it supported the disclosure. “We believe that the selfish shortseller report released today by Hindenburg Research was intended solely to generate profit on his short position in Hindenburg at the expense of the IEP’s long-term unit holders,” the firm said. said in a statement.
In just a few short years, Hindenberg and its founder, Nathan Anderson, have made headlines by publishing important research papers on fast-growing companies. Electric car maker Nikola ousted its founder after Hindenburg accused him of fraud, and companies in Adani’s business empire lost billions after Hindenburg said he engaged in stock manipulation and other wrongdoing. Lost the market value of the dollar.
The Hindenburg report also noted that Mr. Icahn took out so-called margin loans to Icahn Enterprises. A margin loan allows an individual or entity to borrow against the value of the collateralized stock. If the stock continues to fall, Mr. Icahn may be forced to sell to meet margin requirements, which could cause the stock to plunge further.
Mr. Hindenberg has gained a prominent supporter. Mr. Ackman, the hedge fund mogul, clashed with Mr. Icahn over the prospects of Herbalife, the supplement company Mr. Ackman sold short. (These two billionaires had a memorable altercation on his CNBC in 2013. swept Wall Street.)
They made peace, but time may not have healed all wounds. “This short report has a karmic quality that reinforces the concept of the wheel of life and death.” Ackman tweeted Hindenburg report. “So it’s a must-read.”
Maureen Farrell contributed to the report.
