Icahn Enterprises (NASDAQ:IEP) stock is plunging lower by more than 20% today after the diversified conglomerate reported second-quarter earnings and announced a quarterly dividend cut of 50% to $1 from $2. IEP stock has been highly volatile following the publication of Hindenburg Research’s short report, which alleged that Icahn was at risk of a margin call due to taking on too much leverage against his company, among other things.
Following the steep drop, the short seller took a victory lap and disclosed that its short position remains open:
On May 2nd, we predicted that "Icahn Enterprises will eventually cut or eliminate its dividend entirely, barring a miracle turnaround in investment performance."
Today, $IEP reported further investment losses and slashed its dividend by 50%.
We remain short. https://t.co/uacxg1yEBG
— Hindenburg Research (@HindenburgRes) August 4, 2023
“I believe the second quarter partially reflected the impact of short-selling on companies we control or invest in, which I attribute to the misleading and self-serving Hindenburg report concerning our company,” said Chairman Carl Icahn. “It also reflected the size of the hedge book relative to our activist strategy.”
If the dividend cut wasn’t enough, Icahn Enterprises also reported several declining metrics across the board. Let’s get into the details.
IEP Stock Falls Amid Dividend Cut, Disappointing Earnings
During the quarter, revenue tallied in at $2.5 billion, down by 28.5% year-over-year (YOY) compared to $3.5 billion last year. Meanwhile, net loss was $269 million, equivalent to an EPS loss of 72 cents. A year ago, the company reported a net loss of $128 million, or an EPS loss of 41 cents. Adjusted EBITDA took a hit as well, coming in at $34 million compared to $126 million a year ago. For the rotten cherry on top, Icahn Enterprise’s indicative net asset value fell to $5 billion, down from $5.6 billion on Dec. 31, 2022.
In the report, Icahn reiterated that he entered into a three-year term loan agreement with his lenders, which he believes has “significantly diffused the effects of the misleading Hindenburg report.” Additionally, he believes the agreement has helped influence a $500 million gain in the company’s publicly traded securities during July.
The hedge fund manager likely foresaw the drastic effects of a dividend reduction and released a statement to quench the panic. Icahn pointed out that if you purchased 1,000 IEP units in January 2000 and elected to receive the distributions in cash, you would have received $76,000 while holding on to the shares. He also added that the dividend rate can be changed quarterly based on factors analyzed by the Board of Directors.
On the date of publication, Eddie Pan did not hold (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.
