Hindenburg Research, the most notorious short-selling investment firm, has seriously damaged the reputation of Carl Icahn and his holding company Icahn Enterprises. After releasing a very damaging report accusing Icahn Enterprises of using a “Ponzi-like” structure to mask the reality of years of terrible performance and overvaluation of its holdings, the stock price of Carl Icahn’s holding company has been on a free fall.
Icahn Enterprises announced on July 28, 2023, that it would be cutting its quarterly dividend in half, from $0.75 per share to $0.375 per share. The company cited the current economic climate and its own financial position as reasons for the cut. On August 3, 2023, the stock price of the company was roughly around $33 a share. The stock price tanked this Friday, August 4, 2023, from $33 to $22.51 when the market opened.
Icahn Enterprises Stock Price
Source: CNBC
The dividend cut was met with mixed reactions from investors. Some investors were disappointed by the cut, while others saw it as a necessary move to preserve the company's financial health. The stock price of Icahn Enterprises fell by about 10% on the day of the announcement.
Icahn Enterprises reported a net loss of $269 million in the second quarter, more than doubling the loss of $128 million from the same quarter a year ago. Carl Icahn attributed the disappointing quarter to the short-selling activity in his controlling companies and investments, according to CNBC.
In a statement justifying the loss, Icahn said: “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.”
The dividend cut is not the first time that Icahn Enterprises has had to make adjustments to its dividend policy. In 2008, the company cut its dividend by 75% in response to the financial crisis.
The dividend cut is take effect on August 15, 2023, and it is expected save the company about $100 million per year. The news that Icahn Enterprises would cut dividend did not surprise Hindenburg Research. In fact, the short-seller anticipated the moved. “Icahn Enterprises will eventually cut or eliminate its dividend entirely, barring a miracle turnaround in investment performance,” said Hindenburg when it had announced its short position.
Icahn Enterprises has performed poorly in the past decade. For many years, Icahn has publicly expressed suspicion of the bull market that raged around him. He shorted the stock market in a big way as a hedge against his long activist positions, according to MarketWatch. Going into 2021, for example, Icahn investment fund had a short exposure of 142%, SEC filings show.
Investors are waiting to see the outcome of a federal probe of IEP’s corporate governance and other issues, which as disclosed along with first-quarter earnings.
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