Icahn Enterprises Shares Drop More Than 15% on Hindenburg Short Play

The activist short-seller says IEP’s dividend and valuation are unsustainable

Carl Icahn

Neilson Barnard / Staff / Getty Images

Icahn Enterprises LP (IEP) share prices slumped about 15% in intra-day trading after the holding company owned by activist investor Carl Icahn was accused of having “ponzi-like" dividend payments by Hindenburg Research.

Key Takeaway

  • Hindenburg questioned the valuation of IEP with a 218% premium to NAV.
  • The company has had a negative free cash flow of $4.9 billion since 2014 but paid $1.8 billion in dividends.
  • The investment portfolio has lost 53% since 2014, while the S&P500 is up 147%.

Hindenburg based its short call around the company’s valuation, which it claims is inflated by 75%, with the company trading at 218% to its net asset value (NAV).

The short-seller's report highlighted that activist funds owned by Dan Loeb and Bill Ackman traded at a discount of -14% and -35% respectively. The company also turned on Icahn for the company’s “Ponzi-like” dividend, which the short-seller said was unsupported by IEP’s cash flow and investment performance.

Icahn and his son own 85% of IEP, which is responsible for about 85% of the elder's net worth. Hindenburg said the closed-end fund was also highly levered with $5.3 billion in debt, with more than $1 billion due each year from 2024 to 2026. A total of 60% of Icahn’s units have been pledged for personal margin loans, which can lead to margin calls if the unit price falls, Hindenburg added.

Digging deeper into the holdings, the short call also questioned the value of some of Icahn’s holdings. Icahn’s investment portfolio has lost 53% since 2014, compared to a 147% return for the S&P500 over the same period. The same period saw $1.5 billion in dividends paid out despite a negative free cash flow of $4.9 billion.

IEP 2014-2023


Hindenburg noted the poor performance of large holdings such as CVR Energy (CVI), and the company’s Icahn Automotive Group. “Suspicious marks” were also noted for a meat packing company and the IEP property holdings.

Hindenburg Research took on another titan earlier this year after releasing a report on the empire of India’s richest man, Gautam Adani. Hindenburg accused the company of being involved in a “brazen stock manipulation and accounting fraud scheme." Adani’s company refuted the allegations but shares in the company are down around 50% year-to-date.

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  1. Hindenburg Research. "Icahn Enterprises".

  2. Hindenburg Research. "Adani Group".

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