Hindenburg Research blasts Carl Icahn’s hedge fund as ‘Ponzi-like’
Billionaire corporate raider Carl Icahn’s hedge fund has allegedly created a “Ponzi-like economic structure” that has falsely inflated the value of his investments, according to bombshell allegations from a prominent short-seller on Tuesday.
Hindenburg Research — whose other targets lately have included Indian billionaire Gautam Adani and electric-car company Nikola — revealed that it has taken a short position on Icahn Enterprises (IEP) – and said it has “uncovered clear evidence” of “inflated” valuations for some of the holding company’s assets.
The short seller noted that the current dividend yield for 87-year-old Icahn’s firm is among the richest on Wall Street at 15% — and claimed it “is entirely unsupported by IEP’s cash flow and investment performance, which has been negative for years.”
Hindenburg also claimed that Icahn Enterprises has kept raising its dividend, despite lagging performance, in order to lure retail investors.
“In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors,” Hindenburg said in its report. “Such Ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one ‘holding the bag.’”
The Post could not independently verify Hindenburg Research’s claims about Icahn.
The firm alleged that IEP’s “units” of assets under investment “are inflated by 75%” – with IEP trading “at a 218% premium to its last reported net asset value (NAV).”
That’s “vastly higher than all comparables,” the firm added, noting that hedge funds including Dan Loeb’s Third Point and Bill Ackman’s Pershing Square actually trade at a discount to their NAV.
Hindenburg also laid some blame on the financial services firm Jefferies – noting it is the “only large investment bank with research coverage on IEP.”
Jefferies has maintained a “buy” rating for IEP units in what Hindenburg claims is the “one of the worst cases of sell-side research malpractice we’ve seen.” At the same time, Jefferies has “run all of IEP’s $1.7 billion in [at-the-market] offerings” since 2019.
“In essence, Jefferies is luring in retail investors through its research arm under the guise of IEP’s ‘safe’ dividend, while also selling billions in IEP units through its investment banking arm to support the very same dividend,” Hindenburg alleged.
Shares of Icahn Enterprises fell by approximately 10% in premarket trading.
Icahn, 87, is one of the world’s richest individuals, with an estimated net worth of $24.8 billion, according to the Bloomberg Billionaires Index.
Icahn and his son, Brett, own approximately 85% of Icahn Enterprises.
A prominent activist investor, Icahn has waged high-profile corporate battles with the likes of McDonald’s, Herbalife and Occidental Petroleum, among various other firms.
“Carl Icahn has built an aura of invincibility around himself—a titan of Wall Street with a knack for coming out on top,” Hindenburg’s report said. “But while the focus has always been on his grand public activist campaigns, quieter long-term investment losses, along with the substantial use of leverage, have whittled away his empire.”
“At this stage, Icahn’s net worth is reliant on selling overpriced IEP units to retail investors while convincing them that they will be rewarded with a consistent, safe dividend in perpetuity, despite extensive evidence to the contrary,” the report added.
Icahn Enterprises did not immediately return a request for comment. The Post has also sought comment from Jefferies.
Hindenburg Research has developed a reputation for waging public campaigns against firms in which it has taken a short position.
Earlier this year, Hindenburg accused India-based billionaire Gautam Adani of running “the largest con in corporate history” through his conglomerate, Adani Group.
The allegations, which included alleged accounting fraud and other malfeasance, prompted a massive sell-off of Adani’s publicly listed business units. Adani has denied the allegations.
Hindenburg has also accused Block, the financial tech firm run by Twitter founder Jack Dorsey, of “facilitating fraud” in its business. Block denied wrongdoing.
Hindenburg, run by Nathan Anderson, first rose to national prominence after levying fraud claims against the electric vehicle firm Nikola.
Nikola founder Trevor Milton was later found guilty of securities fraud after Hindenburg’s allegations prompted an investigation.
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