Carl Icahn Plans “Counterattack” As IEP’s Market Cap Plunges From $19 Billion To $7 Billion
Carl Icahn’s net worth continues to bleed, with Bloomberg reporting on Thursday that the billionaire’s company has fallen in value from about $19 billion to $7 billion, following a critical report by short seller Hindenburg Research.
The activist investor, who “controls about 84%” of Icahn Enterprises, continues to grapple with margin loans, having borrowed billions against his stock in the company. Bloomberg floated the idea that Icahn could “simply buy the rest of the stock and take Icahn Enterprises private”, something we also alluded to on Twitter yesterday:
Why doesn Icahn just LBO IEP: 10MM shares short and float is only 57MM
— zerohedge (@zerohedge) May 25, 2023
The latest plunge in IEP stock came after his longtime nemesis Bill Ackman weighed in on Twitter on Wednesday, escalating rhetoric about Icahn’s leverage and his lenders that have enabled it. Specifically, Ackman said that Icahn Enterprises reminded him “somewhat” of Archegos Capital Management, Bill Hwang’s firm that infamously collapsed.
Ackman wrote on Twitter Wednesday:
I am surprised that Icahn has not disclosed the terms of his margin loans including who provided them. My understanding of [SEC] 13D rules is that they require disclosure of sources of financing and even copies of financing agreements, although many investors ignore these requirements.
Icahn’s favorite Wall Street saying: “If you want a friend, get a dog.” Over his storied career, Icahn has made many enemies. I don’t know that he has any real friends. He could use one here.
I have been fascinated by the @HindenburgRes $IEP situation, and there are some interesting learnings here. For example, one learns from $IEP that a controlling shareholder of a company with a small float that pays a large dividend can cause his company to trade at a large…
— Bill Ackman (@BillAckman) May 24, 2023
Peter Borish, a founding partner at Tudor Investment Corp., told Bloomberg on Thursday: “The thread here is always the same — leverage cuts both ways. On the way up it’s great, but in markets, you take the escalator up and elevator down.”
“Deleveraging can be swift and painful,” he added.
Icahn did score a small win on Thursday, however, getting one nominee onto the board at Illumina Inc., where he is waging his most recent activist fight.
And late in the day on Thursday, Fox Business News’ Charlie Gasparino reported that Icahn “is planning a counterattack” against Hindenburg Research, which may include “legal action or buyback of shares”. “An assistant for Icahn had no comment,” Gasparino wrote.
Recall, on May 2nd, Hindenburg accused Icahn of “throwing stones” from his own glass house, claiming that shares of IEP were inflated by more than 75% and, while referring to Icahn as a “legend”, said he “has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well.”
“Confidence games never last forever. We expect Icahn Enterprises will be no different,” the short seller concluded on May 2. The Wall Street Journal reported that Icahn was under federal investigation following Hindenburg’s research.