After Adani & Jack Dorsey, Hindenburg's Latest Report Targets American Billionaire Carl Icahn
After rattling the Adani group and then Jack Dorsey's Block this year, US-based short seller Hindenburg Research has come out with its latest report, which targets another billionaire's firm. Hindenburg's latest report, which it released yesterday evening, has criticised American conglomerate Icahn Enterprises LP, leading to a 20% drop in the shares of activist investor and billionaire Carl Icahn's firm.
After rattling the Adani group and then Jack Dorsey's Block this year, US-based short seller Hindenburg Research has come out with another report, targeting another billionaire's firm.
Hindenburg's New Target
NEW FROM US:
¡ª Hindenburg Research (@HindenburgRes) May 2, 2023
Icahn Enterprises¡ªThe Corporate Raider Throwing Stones From His Own Glass Househttps://t.co/ju6JGehKMt $IEP
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Hindenburg's latest report, which it released yesterday evening, has criticised American conglomerate Icahn Enterprises, leading to a nearly 20% drop in the shares of 87-year-old activist investor and billionaire Carl Icahn's firm.
This turns out to be a rare and unexpected challenge for billionaire Icahn, who, as one of the pioneers of shareholder activism, is accustomed to dressing down companies over their governance and transparency but has not had to field such criticism himself, as per a Bloomberg report.
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Hindenburg's Accusations Against Icahn Enterprises
In its report published on Tuesday, Hindenburg accused Icahn Enterprises of overvaluing its holdings and relying on a "Ponzi-like" structure to pay dividends. The nearly 20% subsequent plunge in the conglomerate's shares wiped off $10.2 billion from his net worth (as per the Bloomberg Billionaire Index).
Billionaire Icahn said in a statement that Hindenburg's "self-serving" report was aimed at generating profits at the expense of IEP's long-term shareholders.
"We stand by our public disclosures and we believe that IEP's performance will speak for itself over the long term as it always has," Icahn said. Icahn is Icahn Enterprises' controlling shareholder with an 85% stake.
Hindenburg said the firm's units are overvalued by more than 75% and that "IEP trades at a 218% premium to its last reported net asset value (NAV), vastly higher than all comparables."
Also Read: Meet Nathan Anderson, The Man Behind Hindenburg Report
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IEP's peers, on the other hand, such as Dan Loeb's Third Point Investors Ltd. and Bill Ackman's Pershing Square Holdings Ltd., trade at a discount to their respective NAVs, Hindenburg said. As per the report, NAV is a key gauge of a fund's performance, measuring the market value of securities held by the fund.
Hindenburg argued that driving the frothiness in IEP's stock is its dividend yield of 15.8%, the highest of any U.S. large-cap company by far. Hindenburg accused Icahn of inflating the dividend yield by receiving his own dividend in stock rather than cash and making IEP sell new stock so it could meet the shareholder payouts.
"Icahn has been using money taken in from new investors to pay out dividends to old investors," said Hindenburg.
Hindenburg also offered examples that it said showed the firm itself was valuing its holdings way above their market value. IEP recorded its 90% stake in meat-packaging business Viskase Companies at $243 million at year-end when its market value at the time, based on how its shares were trading, was just $89 million, Hindenburg said, citing IEP's filings.
In a filing, Icahn Enterprises reportedly attributed the valuation markup to "market comparables due to a lack of material trading volume."
Hindenburg also took aim at the close relationship between investment bank Jefferies and Icahn. Hindenburg reportedly noted that Jefferies, the only major brokerage to cover the conglomerate, assumes in its equity research that Icahn's dividends will be paid in perpetuity even in the worst-case scenario, while at the same time profiting from arranging IEP's stock sales.
Also Read: Hindenburg Trolled For Failing To Detect SVB Crisis
Hindenburg's Long List Of Targets
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1. September 2020-Nikola
2.June 2020-WINS Finance
3.June 2020-Genius Brands
4.May 2020-China Metal Resources Utilization
5.April 2020-SC Worx
6.March 2020-Predictive Technology Group
7. March 2020- HF Foods
8. October 2019- SmileDirectClub
9. September 2019-Bloom Energy
10. December 2018-Yangtze River Port & Logistics
11. December 2018-Liberty Health Sciences
12. December 2018- Aphria
13. December 2017- Riot Blockchain
14. December 2017-PolarityTE
15. November 2017- Opko Health
16. November 2017- Pershing Gold
17. 2016- RD Legal
18. January 2023- Adani Group
19. March 2023-Block Inc
To know more about the list, click here.
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