Icahn Enterprises (IEP) stock fell by 11.5% yesterday, closing at its lowest level in over 20 years. The decline came after the company announced its plans to sell depository units worth about $400 million through an at-the-market offering program.
Icahn Enterprises is run by the billionaire activist investor Carl Icahn. IEP invests in several industries, such as energy, food packaging, real estate, and pharmaceuticals, among others.
The issuance of more depositary units has sparked fears of dilution among existing shareholders, contributing to the market sell-off. It is worth mentioning that Jefferies (JEF), the only brokerage covering IEP, is acting as the sales agent for the share sale program.
Dilution Amid Regulatory Fallout
Interestingly, the sell-off comes amid ongoing regulatory scrutiny. Last week, Icahn and his company settled charges with U.S. regulators over undisclosed margin loans, agreeing to pay $2 million in penalties.
Additionally, Icahn Enterprises is involved in a legal dispute with short-seller Hindenburg Research. Last year, Hindenburg Research accused the company of inflating asset valuations to sustain dividend payments.
What Is the Future of IEP Stock?
The potential for further dilution from the recent share sale program, coupled with ongoing regulatory scrutiny and legal challenges, creates uncertainty about the company’s future prospects. Despite these challenges, Icahn Enterprises’ robust cash reserves provide flexibility for strategic capital allocation, such as acquisitions, share buybacks, or dividend payments.
IEP stock has declined about 14% in the past six months.
