Billionaire company raider Carl Icahn’s hedge fund has allegedly created a “Ponzi-like financial construction” that has falsely inflated the worth of his investments, in accordance with bombshell allegations from a distinguished short-seller on Tuesday.
Hindenburg Analysis — whose different targets recently have included Indian billionaire Gautam Adani and electric-car firm Nikola — revealed that it has taken a brief place on Icahn Enterprises (IEP) – and mentioned it has “uncovered clear proof” of “inflated” valuations for a few of the holding firm’s property.
The brief vendor famous that the present dividend yield for 87-year-old Icahn’s agency is among the many richest on Wall Road at 15% — and claimed it “is solely unsupported by IEP’s money movement and funding efficiency, which has been destructive for years.”
Hindenburg additionally claimed that Icahn Enterprises has saved elevating its dividend, regardless of lagging efficiency, so as to lure retail buyers.
“Briefly, Icahn has been utilizing cash taken in from new buyers to pay out dividends to previous buyers,” Hindenburg said in its report. “Such Ponzi-like financial constructions are sustainable solely to the extent that new cash is keen to danger being the final one ‘holding the bag.’”
The Put up couldn’t independently confirm Hindenburg Analysis’s claims about Icahn.
The agency alleged that IEP’s “items” of property below funding “are inflated by 75%” – with IEP buying and selling “at a 218% premium to its final reported internet asset worth (NAV).”
That’s “vastly increased than all comparables,” the agency added, noting that hedge funds together with Dan Loeb’s Third Level and Invoice Ackman’s Pershing Sq. truly commerce at a reduction to their NAV.
Hindenburg additionally laid some blame on the monetary companies agency Jefferies – noting it’s the “solely giant funding financial institution with analysis protection on IEP.”
Jefferies has maintained a “purchase” score for IEP items in what Hindenburg claims is the “one of many worst circumstances of sell-side analysis malpractice we’ve seen.” On the identical time, Jefferies has “run all of IEP’s $1.7 billion in [at-the-market] choices” since 2019.
“In essence, Jefferies is luring in retail buyers by way of its analysis arm below the guise of IEP’s ‘protected’ dividend, whereas additionally promoting billions in IEP items by way of its funding banking arm to assist the exact same dividend,” Hindenburg alleged.
Shares of Icahn Enterprises fell by roughly 10% in premarket buying and selling.
Icahn, 87, is likely one of the world’s richest people, with an estimated internet price of $24.8 billion, in accordance with the Bloomberg Billionaires Index.
Icahn and his son, Brett, personal roughly 85% of Icahn Enterprises.
A distinguished activist investor, Icahn has waged high-profile company battles with the likes of McDonald’s, Herbalife and Occidental Petroleum, amongst varied different companies.
“Carl Icahn has constructed an aura of invincibility round himself—a titan of Wall Road with a knack for popping out on prime,” Hindenburg’s report mentioned. “However whereas the main focus has at all times been on his grand public activist campaigns, quieter long-term funding losses, together with the substantial use of leverage, have whittled away his empire.”
“At this stage, Icahn’s internet price is reliant on promoting overpriced IEP items to retail buyers whereas convincing them that they are going to be rewarded with a constant, protected dividend in perpetuity, regardless of intensive proof on the contrary,” the report added.
Icahn Enterprises didn’t instantly return a request for remark. The Put up has additionally sought remark from Jefferies.
Hindenburg Analysis has developed a repute for waging public campaigns in opposition to companies through which it has taken a brief place.
Earlier this yr, Hindenburg accused India-based billionaire Gautam Adani of running “the largest con in corporate history” by way of his conglomerate, Adani Group.
The allegations, which included alleged accounting fraud and different malfeasance, prompted a large sell-off of Adani’s publicly listed enterprise items. Adani has denied the allegations.
Hindenburg has also accused Block, the monetary tech agency run by Twitter founder Jack Dorsey, of “facilitating fraud” in its enterprise. Block denied wrongdoing.
Hindenburg, run by Nathan Anderson, first rose to nationwide prominence after levying fraud claims in opposition to the electrical automobile agency Nikola.
Nikola founder Trevor Milton was later found guilty of securities fraud after Hindenburg’s allegations prompted an investigation.
