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By: Ellen Cans
Hindenburg Research has revealed that it has taken on a short sale position on Icahn Enterprises (IEP), the hedge fund owned by billionaire Carl Icahn.
As reported by the NY Post, Hindenburg Research disclosed its short position and ripped the hedge fund alleging it has a “Ponzi-like economic structure”. Hindenburg, which was founded in 2017 by Nathan Anderson, is an investment research firm with a focus on activist short-selling. Hindenburg Research said it has “uncovered clear evidence” of “inflated” valuations for some of the holding company’s assets, it said in a report published May 2nd. The research company, which has about 9 employees, also recently targeted Indian billionaire Gautam Adani and electric-car company Nikola.
In reference to Icahn’s firm, the short seller said that IEP’s current dividend yield is one of the highest on Wall Street –at 15%. It claimed that this rich yield “is entirely unsupported by IEP’s cash flow and investment performance, which has been negative for years.” Hindenburg accused Icahn Enterprises of steadily raising its dividend, even with lackluster performance, in a bid to attract retail investors.
“In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors,” Hindenburg said in a report. “Such Ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one ‘holding the bag.’” The research company also alleged that IEP’s “units” of assets under investment “are inflated by 75%”, and that IEP is trading “at a 218% premium to its last reported net asset value (NAV).” That’s “vastly higher than all comparables,” the report added.
The Post could not independently verify Hindenburg Research’s claims. Icahn Enterprises and Jefferies did not immediately respond to the Post’s request for comment.
Hindenburg also took a shot at financial services firm Jefferies, noting it has maintained a steady “buy” rating for IEP. The company said Jefferies is the “only large investment bank with research coverage on IEP,” and claimed it’s “one of the worst cases of sell-side research malpractice we’ve seen.” It added that Jefferies has “run all of IEP’s $1.7 billion in [at-the-market] offerings” since 2019. “In essence, Jefferies is luring in retail investors through its research arm under the guise of IEP’s ‘safe’ dividend, while also selling billions in IEP units through its investment banking arm to support the very same dividend,” Hindenburg alleged.
Per the Post, after the report, shares of Icahn Enterprises tumbled 20 percent. Icahn, 87, and his son Brett, own approximately 85% of Icahn Enterprises. The drop in the share price took some $3.3 billion off Icahn’s net worth, leaving him with an estimated $14.3 billion, as per Forbes’ recent estimate. Icahn is one of the world’s richest people, with an estimated net worth of$24.8 billion, as per the Bloomberg Billionaires Index.
Hindenburg Research has earned a reputation for launching public attacks against companies, after taking on a short position therein. Other recent targets included Adani Group, Block, and Nikola.
