WASHINGTON (AP) — The business empire of corporate robber and activist investor Carl Icahn continues to fall under the fallout of a recent report by short selling firm Hindenburg Research — and losses are mounting as a longtime rival backs up the company’s allegations.
In the report, released May 2, Hindenburg alleged that Icahn Enterprises used inflated asset valuations. The report also cited “Ponzi-like economic structures” at the holding company and claimed that Icahn used funds from new investors to distribute dividends to old investors. Based in Sunny Isles Beach, Florida, Icahn Enterprises has interests in companies ranging from food packaging and automobiles to real estate and pharmaceuticals.
Since Hindenburg exited his short position, the market value and stock of Icahn Enterprises (IEP) have plummeted. The company’s market cap was slashed by more than half this month — from about $18 billion on May 1 to $7.01 billion on Thursday — and IEP stock is down nearly 63% since early May please.
Hindenburg is known for short selling. It involves borrowing a stock that is expected to decline in value and selling it at the current market price with a plan to later buy back the same number of shares at a lower price.
Icahn fought back against Hindenburg. The billionaire called the company’s report “self-serving” and “solely aimed at reaping profits from Hindenburg’s short position at the expense of IEP’s long-term shareholders.”
In a subsequent May 10 statement, Icahn promised that the company would “take all appropriate steps to protect and defend our shareholders.”
But some critics of Icahn, a Wall Street legend known for targeting underperforming companies and selling them for parts, say the report’s findings come full circle.
“Hindenburg’s brief account has a karmic quality that reinforces the notion of a cycle of life and death,” Bill Ackman, CEO of Pershing Square Capital Management and a longtime rival of Icahn, wrote on Twitter on May 2.
The story goes on
Ackman upped the ante this week, sharing a lengthy tweet on Wednesday addressing several factors surrounding the Icahn Enterprises fallout, including why Icahn failed to disclose the terms of its market loans and the possible concerns of the Market lenders regarding the situation the recent involvement of the Department of Justice.
The U.S. Attorney’s Office for the Southern District of New York contacted Icahn Enterprises on May 3 for information about the company and its finances, according to an SEC filing by the company on May 10 — a week after Hindenburg released its report had. Icahn Enterprises said it is cooperating with the request.
“The US Attorney’s Office has made no claims or allegations against us or Mr. Icahn in relation to the foregoing investigation,” Icahn Enterprises said in the filing at the time. “We do not currently believe that this investigation will have a material impact on our business, financial condition, results of operations or cash flows.”
As of Thursday, a day after Ackman’s most recent tweet, Icahn Enterprises stock was down more than 20%.
“Icahn’s favorite Wall Street saying: ‘If you want a boyfriend, get a dog.’ Over the course of his storied career, Icahn has made many enemies. I don’t know that he has real friends. He could use one here,” Ackman wrote Wednesday.
The feud between Ackman and Icahn goes back decades, including a 2003 deal with Hallwood Realty that led to a years-long business dispute.
The feud peaked in 2013 when Ackman denounced Herbalife as a pyramid scheme and heavily bet against the supplement company through short trades – however, Icahn vehemently disagreed and increased his stake in Herbalife. The two later got into a shouting match on live TV.