Shares of Icahn Enterprises dropped as much as 20% after it revealed New York federal prosecutors contacted the company for information about its business, including corporate governance, valuations and due diligence.
by Carl Icahn the company disclosed in a regulatory filing Wednesday that it received the request from prosecutors on May 3, the day after the short seller Hindenburg Research released a report stating that he believed Icahn Enterprises was overvalued and held some of its assets at inflated value.
“The United States Attorney’s Office has not filed any claims or charges against us or against Mr. Icahn in connection with the aforementioned investigation,” the company wrote.
Hindenburg’s report on Icahn Enterprises pits Icahn, one of the world’s best-known and most aggressive activist investors, against Nathan Anderson, a short seller who has released scathing reports on companies like the Indian conglomerate Adani Group AND Jack Dorsey’s block since it hit the scene a few years ago.
Icahn Enterprises also released its rebuttal to the Hindenburg report, which it had previously labeled “selfish,” on Wednesday.
“Hindenburg Research, founded by Nathan Anderson, would more appropriately be called Blitzkrieg Research given its tactic of wantonly destroying property and harming innocent civilians,” Icahn wrote in a statement. “But, unlike many of his victims, we won’t stand by. We intend to take all appropriate steps to protect our shareholder and fight back.”
Central to Hindenburg’s relationship was a margin loan Icahn took out with Morgan Stanley in which he pledged 184 million shares of Icahn Enterprises stock, which at the time represented more than 60% of his holdings. That disclosure prompted a steep drop in Icahn Enterprises’ shares, which trade at a large premium to the group’s reported net asset value.
In the rebuttal statement, the activist said that “he and his affiliates” were “in full compliance with all personal loans.”
Icahn admitted that he has lost money maintaining market coverage over the past decade, which has hit Icahn Enterprises’ net asset value per share. But he said the company has recently taken steps to reduce its short position and is focusing on activism.
The rebuttal also called into question Hindenburg’s analysis that the holding company’s directly owned assets that included refining, real estate and auto parts were overvalued. Icahn said he has sold billions of dollars in assets far in excess of the values at which they were held on his balance sheet for more than a decade.
The corporate raider is known for rallying grassroots shareholders in campaigns against corporate executives, and he used a similar tactic to strike back at Hindenburg. Most of the outside investors in the company were retail shareholders who had been given the opportunity to invest alongside “the iconic Mr. Icahn,” he said, but their savings were now being destroyed by a short seller.
Hindenburg did not immediately respond to a request for comment.
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