Shares of Icahn Enterprises (NASDAQ: IEP) were down in morning trading on Tuesday morning after short-seller Hindenburg Research went after activist investor, Carl Icahn‘s Icahn Enterprises.
The research firm has taken a short position against IEP alleging that asset valuations of IEP are “inflated” and its shares have a very high net asset value premium compared to its peers.
The report stated, “Overall, we think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well.”
Icahn Enterprises is headquartered in Sunnyvale, California, and is a holding company involved in multiple businesses including energy, automotive, food packaging, metals, and real estate.
Hindenburg Research has also alleged that Icahn’s current dividend yield of around 15.8% is the highest dividend yield of any U.S. large-cap company, and is “entirely unsupported by IEP’s cash flow and investment performance, which has been negative for years.” The report alleges that IEP’s investment portfolio has lost around 53% since 2014 and IEP has cumulatively burned free cash flows of around $4.9 billion over the same period.
Moreover, Hindenburg has stated that the high dividend yield “is made possible (for now) because Carl Icahn owns roughly 85% of IEP and has been largely taking dividends in units (instead of cash), reducing the overall cash outlay required to meet the dividend payment for remaining unitholders.”
IEP stock has gained by more than 10% in the past year.
