Shares in Icahn Enterprises Drop 20% After Federal Investigation Confirmed

Carl Icahn

Neilson Barnard / Staff / Getty Images

Activist investor Carl Icahn’s firm has confirmed it's being investigated by the federal government after a report from short-seller Hindenburg Research accused the company of inflating its valuation.

Key Takeaways

  • Icahn Enterprises stock drops 20% after its first-quarter earnings.
  • The company confirmed it is under a federal investigation.
  • Icahn said he will “fight back” against short-seller Hindenburg Research.

Icahn Enterprises (IEP) said it was contacted by the U.S. Attorney’s office for the Southern District of New York a day after Hindenburg released a report claiming the investment firm had “ponzi-like" dividend payments. The report said the dividends were not supported by the funds' cash flow or investment performance and based its short call around the company’s valuation, which it claims is inflated by 75%.

Investigators are asking for information about the firm's "corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials, (and) due diligence," according to Icahn Enterprises' latest filings with the SEC.

Shares of IEP dropped almost 20% Wednesday after the confirmation of the investigation. The firm said it was cooperating with the U.S. Attorney's office, but hit back against preliminary reports of the investigation yesterday when CEO David Willetts said the company has “full confidence” in its finances and the fundamentals of the business.

Carl Icahn also broke his silence in a statement on the company's website yesterday, saying Hindenburg should be renamed “Blitzkrieg Research,” for “wantonly destroying” property and harming investors.

Icahn said IEP will take steps to protect its investors and “fight back” against the claims. The company is reducing its short positions to focus on activist investing, blaming the fund's bearish view on the market for the fund's underperformance, he said.

“We believe our existing portfolio has considerable upside potential over the coming years,” Icahn said.

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  1. SEC. "Icahn Enterprises Q1 Earnings Filing".

  2. Hindenburg Research. "Icahn Enterprises."

  3. Bloomberg. "Icahn has 'Full Confidence' in its Financials".

  4. Icahn Enterprises. "IEP Hits Back Against Self-Serving Short Seller."

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