Icahn Enterprises (NASDAQ:IEP) was targeted by short seller Hindenburg Research on May 2, sending IEP stock down 20%.
IEP opened today, May 3, at under $40 per share, after opening on May 2 at over $50. This brought the market capitalization down to $14.2 billion and the yield on the $8/share annual dividend above 15%. As of writing, IEP stock is down about 14% to below $35.
The Hindenburg report, called “Throwing Stones from His Own Glass House,” claimed the fund was trading at 218% above its net asset value. It said the dividend is more than half that and claimed: “Icahn has been using money taken in from new investors to pay out dividends to old investors.”
Icahn Haz Ponzi?
Icahn personally owns almost 85% of IEP. The largest stakes below that are held by Morgan Stanley (NYSE:MS), Horizon Kinetics, Mirai Asset Global Investments, Susquehanna Investment Group and Geode Capital Management. Those stakes, taken together, make up less than 1% of the common stock.
Icahn, now 87, has been an active corporate raider since the 1980s. His first deal led to the breakup of TWA. He closed his hedge fund in 2011 but allows outside investment in Icahn Enterprises through IEP stock.
The Hindenburg report compared IEP to Daniel Loeb’s Third Point, which trades in London as Third Point Investors (OTCMKTS:TPNTF). It said TPNTF trades at a 15% discount to its net asset value. A similar fund run by Bill Ackman, Pershing Square Holdings (OTCMKTS:PSHZF), trades at an even bigger discount to its assets.
Bloomberg says the Hindenburg report took $10 billion off Icahn’s fortune, including a margin loan collateralized by his own stake in the company. Forbes still estimates his net worth at $14.7 billion.
IEP Stock: What Happens Next?
Carl Icahn needs a friend with money to support his stock. No one has come out publicly in support since the Hindenburg report came out. Investors should watch IEP stock closely to see if any turn-up.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
