Over almost a half-century, Carl Icahn has shaken up Wall Street as a company raider and activist shareholder, making company titans bow right down to his calls for and alter their business methods.
But on Tuesday, his publicly traded firm, Icahn Enterprises, turned a goal of Hindenburg Research, the brief vendor agency that has made its identify lately by taking over the Indian tycoon Gautam Adani and the Twitter co-founder Jack Dorsey.
Hindenburg accused Icahn Enterprises of being overvalued. The firm trades properly above its web asset worth, not like comparable monetary autos run by William A. Ackman and Daniel S. Loeb. Hindenburg additionally referred to as out what it mentioned was an unjustifiably hefty dividend being financed by inventory gross sales.
“Icahn has been using money taken in from new investors to pay out dividends to old investors,” Hindenburg wrote in a public report. It likened Icahn Enterprises to “Ponzi-like economic structures” that survive solely whereas new buyers are prepared to be the final “holding the bag.” Hindenburg mentioned that it was betting that Icahn Enterprises’s shares would fall, which might give it a buying and selling revenue.
The firm’s inventory tumbled 20 p.c on Tuesday and dropped an extra 20 p.c throughout Wednesday buying and selling.
Hindenburg additionally referred to as out Jefferies, which it mentioned was the one massive funding financial institution to publish analysis on Icahn Enterprises — and likewise helps the corporate promote inventory.
Icahn Enterprises responded by saying that it stood by its disclosures. “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 I.E.P.’s long-term unit holders,” the corporate mentioned in an announcement.
Over only a few years, Hindenburg and its founder, Nathan Anderson, have shot to prominence by publishing important analysis papers on highflying firms. It has achieved appreciable success: Nikola, an electrical car maker, ousted its founder after Hindenburg accused him of fraud, whereas firms in Mr. Adani’s business empire misplaced billions in market worth after Hindenburg mentioned they perpetrated inventory manipulation and different misdeeds.
The Hindenburg report additionally notes that Mr. Icahn has taken so-called margin loans on Icahn Enterprises. Margin loans permit people or entities to borrow towards the worth of a inventory, which turns into the collateral. Should the inventory proceed to drop, Mr. Icahn could possibly be pressured to promote extra inventory to satisfy these margin calls, which may spark an excellent sharper drop within the inventory worth.
Hindenburg received one outstanding endorser: Mr. Ackman, a hedge fund mogul who memorably clashed with Mr. Icahn over the prospects of Herbalife, the dietary supplements firm that Mr. Ackman had shorted. (The two billionaires memorably bickered on CNBC in 2013, a confrontation that gripped Wall Street.)
They made peace, however time might not have healed all wounds. “There is a karmic quality to this short report that reinforces the notion of a circle of life and death,” Mr. Ackman tweeted of Hindenburg’s report. “As such, it is a must-read.”
Maureen Farrell contributed reporting.
Source: www.nytimes.com