Shares in Icahn Enterprises fell as much as 20 per cent after it revealed federal prosecutors in New York have contacted the company seeking information on its business, including corporate governance, valuations and due diligence.
Carl Icahn’s company disclosed in a regulatory filing on Wednesday that it received the request from prosecutors on May 3, the day after short seller Hindenburg Research released a report saying it believed Icahn Enterprises was overvalued and held some of its assets at an inflated worth.
“The US Attorney’s office has not made any claims or allegations against us or Mr Icahn with respect to the foregoing inquiry,” the company wrote.
Hindenburg’s report on Icahn Enterprises pits Icahn, one of the best known and most aggressive activist investors in the world, against Nathan Anderson, a short seller who has released scathing reports on companies such as Indian conglomerate Adani Group and Jack Dorsey’s Block since coming on to the scene a few years ago.
Icahn Enterprises also released its rebuttal to the Hindenburg report, which it had previously labelled “self-serving”, on Wednesday.
“Hindenburg Research, founded by Nathan Anderson, would be more aptly named Blitzkrieg Research given its tactics of wantonly destroying property and harming innocent civilians,” Icahn wrote in a statement. “But, unlike many of its victims, we will not stand by idly. We intend to take all appropriate steps to protect our unit holders and fight back.”
Central to Hindenburg’s report was a margin loan Icahn took out with Morgan Stanley in which he pledged 184mn Icahn Enterprises shares, representing more than 60 per cent of his holdings at the time. That disclosure sparked a sharp fall in Icahn Enterprises’s shares, which trade at a large premium to the group’s stated net asset value.
In the rebuttal statement, the activist said “he and his affiliates” were “in full compliance with all personal loans”.
Icahn conceded he had lost money maintaining a market hedge over the past decade-plus, which pummelled the net asset value per share of Icahn Enterprises. But he said the company recently took steps to reduce its short position and is focusing on activism.
The rebuttal also challenged Hindenburg’s analysis that the holding company’s directly-owned assets spanning refining, real estate and auto parts were overvalued. Icahn said it has sold billions of dollars in assets far above the values at which they were held on its balance sheet over more than a decade.
The corporate raider is known for rallying rank and file shareholders in campaigns against corporate executives, and he used a similar tactic in responding to Hindenburg. The majority of outside investors in the company were retail shareholders who had been given the chance to invest alongside “the iconic Mr Icahn”, he said, but their savings were now being destroyed by a short seller.
Hindenburg did not immediately return a request for comment.
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