Carl Icahn is one of the most feared sharks on Wall Street. He’s an activist investor, able to impose his agenda on large companies by taking stocks and putting pressure on shareholders and managers. However, the shark is attacked by a larger shark. A pessimistic fund has denounced irregularities in its accounts. That led to the collapse of the stock market and, as he admitted on Wednesday, the launch of a federal investigation. But Icahn is not standing by and has promised this Wednesday to “fight back”. The shark fight is served.
The 87-year-old Icahn is a myth that has transcended the world of finance and even made its way into some layers of popular culture. Netflix made a documentary about him. “Napoleon was undoubtedly a great strategist, but he lost everything through his arrogance. “Not everything lasts forever if you’re not careful,” Icahn said in the documentary, in front of a painting of a Bonapartist battle. Now he’s the one who leaves a large part of his fortune because of his arrogance, his carelessness or worse.
The federal investigation opened on May 3, a day after the Hindenburg Research Fund released a devastating report that sent Icahn Enterprises stock price plummeting. The shark seemed cornered. This fund is dedicated to finding companies whose practices are dubious, take pessimistic positions and expose alleged irregularities. When you convince investors, stocks fall and the fund makes big gains. Hindenburg is one of the most well-known bear companies, having successfully attacked Indian billionaire Gautam Adani and Block, the current company of Twitter founder Jack Dorsey, over the past year.
Icahn Enterprises denied wrongdoing, but the market didn’t buy much. The company even changed the filing date of its quarterly financial statements, raising suspicions. Now it’s the company itself that says it’s under investigation in its quarterly report registered with the Securities and Exchange Commission. The price is down about 20% this Wednesday and is down nearly 40% since the fund’s bearish report was released.
“The Attorney for the Southern District of New York contacted Icahn Enterprises on May 3, 2023, seeking the provision of information about the Company and certain of its subsidiaries regarding corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials and due diligence asked.” and other materials,” the company confesses to the securities commissioner.
“We are cooperating with the request and providing documentation in response to the voluntary information request. The US Attorney’s Office has made no claims or allegations against us or Mr. Icahn in connection with the above investigation. We believe we have a robust compliance program in place and while no guarantees can be given and we are still investigating the matter, we do not currently believe that this investigation will have a material impact on our business, financial condition, results of operations or cash flows becomes.” .
pyramid scheme
Hindenburg’s detailed report found that Icahn Enterprises’ assets were overvalued and that the company’s market value was higher than its assets warranted. He asserted that the company’s dividend was unsustainable and that sustaining that dividend was only due to Icahn controlling 85% of the company and not collecting it in cash.
He used very thick words, referring to a kind of pyramid scheme: “In short, Icahn used the money from the new investors to pay dividends to the old ones.” Such Ponzi economies are only sustainable to the extent that new Money is willing to take the risk of being the last to “take the plunge”.
In parallel, he revealed some of Icahn’s debts that were not known. The latter, which in itself was not an anomaly, prompted Bloomberg to demote him from its list of billionaires, implicitly admitting that its previous calculation of the tycoon’s fortune was wrong. As his stake in the stock market declined, but more importantly by correcting that error, Bloomberg dropped the tycoon from 58th to 119th on its list of the world’s richest people.
to counterattack
In the quarterly report filed with the SEC, Icahn’s company bitterly complains about bear companies like Hindenburg for not being regulated and for their research reports being similar to those of the big Wall Street firms. It also regrets that they find echoes in the media and on the networks.
Carl Icahn issued a harsh statement this Wednesday along with his earnings report: “Hindenburg Research, founded by Nathan Anderson, would be more appropriate to call it Blitzkrieg.” [la estrategia alemana de ataque relámpago en la Segunda Guerra Mundial] Research in light of their tactics of wantonly destroying property and harming innocent civilians. Mr. Anderson’s modus operandi is to launch disinformation campaigns to distort corporate images, tarnish their reputations and rob the hard-earned savings of individual investors. But unlike many of his victims, we will not stand idly by. “We intend to take all appropriate measures to protect and defend our participants,” he said in a note signed in Sunny Isles Beach, Fla.
In his statement, Icahn praised the activism and reviewed part of the long list of companies he landed at to shake up management: Texaco, Reynolds, Netflix, Forest Labs, Apple, CVR Energy, Herbalife, eBay, Tropicana, Cheniere, and Western . Instead, he criticizes bear investors, although he has tried to act like one himself on occasion, without much success.
The tycoon attempts to refute Hindenburg’s allegations and reconsiders the valuations of some of his holdings, but ends up admitting that the company is trading at a significant premium to its net asset value. He offers his peculiar justification for this: “It gives all investors the opportunity to invest alongside a Wall Street legend.”
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