Embattled conglomerate Icahn Enterprises (NASDAQ:IEP) regained a sizable amount of market value following steep losses earlier this week. Short-selling specialist Hindenburg Research blasted Icahn for overvaluing its holdings, per Reuters. In response, the targeted entity announced a dividend in the amount of $2 per depositary unit for the first quarter. At the time of writing, IEP stock gained over 23%.
In a report published on Tuesday, Hindenburg also accused IEP of relying on a “Ponzi-like” structure to pay dividends. At the time, the dramatic freefall of IEP stock wiped $2.9 billion off enterprise founder Carl Icahn’s net worth. According to Forbes, that left him with an estimated $14.7 billion following the initial plunge.
In a statement on Tuesday, Icahn remarked via an IEP statement that Hindenburg’s report was “self-serving.” Also, he stated that the purpose was to generate profits at the expense of IEP’s long-term shareholders.
In a press release Thursday afternoon, Icahn — when announcing the $2 per unit dividend — stated that he and his team “obviously disagree with the inflammatory assertions in the Hindenburg report and intend to respond at length — and to vigorously defend IEP and its unitholders.”
IEP Stock Remains a Risky Investment
Naturally, much of the contrarian appeal surrounding IEP stock centers on the possibility of a short squeeze. According to data from Fintel, the number of shares available to be shorted at a leading prime brokerage at last count sat at zero. A day ago, this figure stood at 200,000.
However, much caution must be applied before prospective speculators jump on this trade. Fintel makes clear that the above metrics do not include data from other brokers or dark pools. Rather, it’s a small sample for primarily tracking the ebb and flow of underlying demand.
In addition, the core stats at time of writing don’t seem remarkable for bullish contrarians of IEP stock. Its short interest is only 2.15% of its float, while the short interest ratio is a miniscule 0.10 days to cover. Moreover, IEP scored 62.57 out of 100 on Fintel’s proprietary Short Squeeze Score. This stat ranks IEP at 2,018 among the 4,593 shorted securities.
Put another way, the bears do indeed target IEP stock. However, there are seemingly 2,017 better short-squeeze opportunities.
Why It Matters
Earlier in the week, Fintel’s options flow sentiment — essentially trades conducted by institutional players — pinged negative as investors panicked out of IEP stock. However, so far on Friday, options flow sentiment has shifted in the modestly optimistic direction, with institutions selling put contracts.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
