Carl Icahn is used to being on the offensive, however this time, he’s the one going through an all-out assault.
In a Might 2 report, the famed short-seller Hindenburg Analysis focused Icahn’s publicly traded conglomerate, Icahn Enterprises, alleging that the corporate is utilizing a juicy however unsustainable dividend yield to lure retail traders right into a “ponzi-like” operation.
“Icahn has been utilizing cash taken in from new traders to pay out dividends to outdated traders,” Hindenburg wrote whereas revealing it had taken a brief place towards his firm’s inventory.
Icahn Enterprises didn’t instantly reply to Fortune’s request for remark about Hindenburg’s allegations. However in a Might 10 assertion responding to Hindenburg’s report, Icahn pushed again together with his typical bravado.
“Hindenburg Analysis, based by Nathan Anderson, could be extra aptly named Blitzkrieg Analysis given its ways of wantonly destroying property and harming harmless civilians. Mr. Anderson’s modus operandi is to launch disinformation campaigns to distort firms’ photographs, injury their reputations and bleed the hard-earned financial savings of particular person traders,” the billionaire wrote, promising to “combat again” towards the allegations.
Icahn’s billionaire arch rival, Pershing Sq. Capital co-founder and CEO Invoice Ackman, was fast to comment on the irony of the company raider, who’s well-known for his harsh criticism of govt mismanagement and company malfeasance, being accused of his personal misdeeds. “There’s a karmic high quality to this brief report that reinforces the notion of a circle of life and dying. As such, it’s a should learn,” he wrote in a Might 2 tweet.
Icahn has had a long-running feud with Ackman, which culminated in a 2013 CNBC interview the place he known as the Pershing Sq. Capital founder a “liar” and a “crybaby” after the 2 had taken opposing positions on the multi-level market firm Herbalife. Ackman famously shorted Herbalife in 2012, arguing the corporate was a ponzi-scheme and its inventory would finally drop to $0 per share, however was pressured to desert his guess in 2018 because the inventory soared after Icahn invested within the firm.
On Thursday, nonetheless, it was Icahn who was underneath strain, as Hindenburg alleged in a comply with up report that he had borrowed billions towards his holdings in Icahn Enterprises (IEP) and invested “some or all” of the cash into his personal funds.
“These funds subsequently generated vital losses, which might pose an overleveraging danger for each Carl Icahn himself, and IEP unitholders,” Hindenburg wrote, noting that it doubled down on its guess towards Icahn Enterprises by shorting its bonds as properly.
Icahn Enterprises didn’t instantly reply to Fortune’s request for remark.
Carl Icahn grew to become well-known for his cutthroat ways as a company raider within the Eighties, which director Oliver Stone relied on to create his Michael Douglas’ “greed is nice” character Gordon Gekko within the 1987 movie Wall Road. The billionaire would generally buy numerous shares in firms he felt had been mismanaged after which push for modifications to the board, layoffs, or the sale of property in an try to enhance earnings and inventory costs. Though Icahn, 87, isn’t the aggressive activist investor he as soon as was, he nonetheless likes to criticize company mismanagement.
In 2015, he warned of a pending recession and blasted U.S. CEOs for borrowing cash for buybacks and acquisitions in an try to artificially inflate earnings in a 15-minute video known as “Hazard Forward.”
“It’s monetary engineering at its top,” he mentioned. “The earnings which might be being put out in the present day, I feel they’re very suspect.”
However now Icahn is being accused of his personal kind of monetary engineering. Icahn Enterprises inventory has plummeted greater than 30% since Hindenburg first revealed its brief place earlier this month, main Icahn’s private internet price to drop over $10 billion, in line with Bloomberg Billionaires Index.
The fallout for Icahn comes after Hindenburg focused India’s Adani Group in January, main the corporate right into a tailspin that noticed CEO and co-founder Gautam Adani’s internet price plummet by $60 billon, in line with the Bloomberg Billionaires index.
Hindenburg may not be the investor’s solely drawback. Icahn Enterprises revealed in a Might 10 regulatory submitting, that Federal prosecutors from the U.S. Legal professional’s workplace for the Southern District of New York had been in search of info relating to its “company governance, capitalization, securities choices, dividends, valuation, advertising supplies, due diligence and different supplies.” That disclosure got here a bit greater than every week after Hindenbug’s first assault on the corporate.
Icahn Enterprises mentioned it was cooperating with the request, including that “the US lawyer’s workplace has not made any claims or allegations towards us or Mr. Icahn.”