US short seller Hindenburg Research has unveiled a place towards Icahn Enterprises, the publicly listed fund run by activist Carl Icahn, knocking its share worth and organising a battle between two of Wall Street’s most feared and outspoken buyers.
Hindenburg mentioned in a report on Tuesday that it believed Icahn Enterprises was overvalued and held a few of its personal property at an inflated price. Shares in Icahn’s group fell nearly 20 per cent, reducing its market capitalisation to $14.3bn.
Icahn Enterprises, which is majority owned by Icahn, is the third high-profile firm focused by Hindenburg this yr. The short seller and its founder Nathan Anderson have been on the centre of a world media storm in January after Hindenburg alleged company fraud at Indian conglomerate Adani Group, which the corporate has denied.
Icahn, a legendary investor identified for placing worry in company executives, has redefined how public firms are run and is at current embroiled in a bitter battle with genome sequencing firm Illumina.
At the centre of Hindenburg’s thesis on Icahn Enterprises is the dividend the automobile pays out to its shareholders, which it says has contributed to an “extreme” premium to its web asset worth.
The short seller highlights that comparable autos, comparable to these arrange by Bill Ackman’s Pershing Square Capital Management and Daniel Loeb’s Third Point, commerce at a reduction to their NAV.
Icahn Enterprises mentioned that it operates “from a position of strength,” citing about $2bn of money and money equivalents on its steadiness sheet.
“We believe the self-serving short seller report published by Hindenburg Research today was intended solely to generate profits on Hindenburg’s short position at the expense of IEP’s long-term unit holders,” Carl Icahn mentioned in a press release. “We stand by our public disclosures and we believe that IEP’s performance will speak for itself over the long term as it always has.” IEP is Icahn Enterprises’ inventory image.
Icahn Enterprises pays shareholders an $8 per share annual dividend however Icahn controls about 85 per cent of the corporate and takes his fee within the type of newly issued inventory. The remaining buyers take their dividend fee in money, which Hindenburg alleges is being funded by the corporate promoting inventory.
“In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors,” Hindenburg states in its report.
The Financial Times final yr highlighted that Icahn’s inventory dividend funds had prompted its excellent shares to blow up lately. The NAV of Icahn Enterprises has declined greater than two-thirds over the previous decade owing to the inventory dilution and funding losses from market hedges Icahn maintained throughout a bull market.
“I don’t want to take the cash out. I like to use the cash to be my army, so to speak,” Icahn informed the FT in February 2022.
Hindenburg additionally famous Icahn had taken a mortgage towards 181.4mn shares, or nearly all of his Icahn Enterprises holdings, which the enterprise had disclosed in its annual report.
Icahn mentioned in a securities submitting in February that he had “sufficient additional assets to satisfy any obligations pursuant to these loans without recourse to the depositary units”.
