Wall Street is Worried
about Carl Icahn
The
value of the 88-year-old activist investor’s company has fallen by nearly $20
billion. Mr. Icahn said that he was “absolutely not selling.”
·
The
88-year-old investor made a name and billions for himself by questioning the
decisions and strategies of corporate leaders and agitating for change at
companies like Apple, RJR Nabisco and Netflix.
·
Mr.
Icahn owns roughly 86 percent of the shares, so he has personally lost about
$17 billion.
·
Shares
in Mr. Icahn’s company started tumbling in May 2023 when Hindenburg Research,
the short-selling firm run by Nate Anderson, published a report questioning
Icahn Enterprises’ financials.
Chief
executives of public companies have long feared Carl C. Icahn. The 88-year-old
investor made a name and billions for himself by questioning the decisions and
strategies of corporate leaders and agitating for change at companies like
Apple, RJR Nabisco and Netflix.
But
now Mr. Icahn is under intense scrutiny from Wall Street investors, who are
rapidly selling his company’s stock. In the past year and a half, shares of
Icahn Enterprises, his publicly traded investment company, have dropped more
than 75 percent, losing nearly $20 billion of value. After dropping more than
30 percent since mid-August alone, it now trades at $10.53 a share, its lowest
level in more than two decades.
Mr.
Icahn owns roughly 86 percent of the shares, so he has personally lost about
$17 billion.
“There’s
a confidence game and he’s lost the confidence of investors,” said Don Bilson,
who focuses on activist investing as the head of event-driven research at
Gordon Haskett Research Advisors.
Some
Wall Street investors are now worried that the stock’s continuing fall could
threaten the health of the entire company and that it could be forced to sell
companies it holds. Icahn Enterprises holds a mix of public stocks, real estate
and other investments, according to interviews with Mr. Bilson and several other
market watchers.
Investors
have been questioning whether Mr. Icahn himself has been selling his stock. He
has taken out personal loans using his stock as collateral. Banks that offer
these loans typically have strict requirements related to the value of a
company. A sharp drop in a stock price could force a lender to sell shares.
In
an interview this week, Mr. Icahn said that he was “absolutely not selling.” He
also said there had not been any so-called margin calls on personal loans
backed by his stock. Margin calls occur when a lender forces a borrower to sell
stock to settle a loan. “I don’t foresee margin calls,” he said.
Shares
in Mr. Icahn’s company started tumbling in May 2023 when Hindenburg Research,
the short-selling firm run by Nate Anderson, published a report questioning
Icahn Enterprises’ financials. Among other things, Hindenburg accused Icahn
Enterprises of having a “Ponzi-like economic structure” and paying a dividend
it couldn’t afford. (It has since cut its dividend.) He also questioned Mr.
Icahn’s use of personal loans backed by the stock.
Mr.
Anderson said in an interview this week that he expected Icahn Enterprises’
stock would still fall further. He continues to hold a short position, betting
against the stock. He said Mr. Icahn’s extensive use of personal loans is still
dangerous to the company’s future. “He’s got too much debt and needs cash. He’s
really cornered himself,” he said. “There’s no safe exit.”
In
April 2023, Icahn Enterprises stock traded around $50 to $55 a share.
But
investors became increasingly skeptical of Mr. Icahn
after the Hindenburg report was released, as evidenced by the sharp sell-off.
The move out of the stock intensified after the firm cut its dividend in August
that year.
The
pressure mounted even further since last month, when the Securities and
Exchange Commission charged Mr. Icahn with failing to disclose that he had
personally pledged his own stock as collateral for margin loans worth billions
of dollars. The settlement called for Mr. Icahn to pay $2 million in fines.
The stock has since continued to drop.
Some investors said they are worried that Icahn may be forced to cut its
quarterly dividend again.
Even with its rapid fall in share price,
Icahn Enterprises still trades at a premium to its so-called net asset value,
the value of a public company’s stakes, real estate and private company
holdings, minus debt and liabilities. Many publicly traded investment firms
trade at a discount to net asset value because of a presumption that certain
stakes would lose value if the manager were forced to sell.
At Icahn Enterprises, Mr. Icahn holds
the largest stake in certain public companies, and some have fared poorly.
Shares of CVR Energy, a Texas-based oil refiner, for example, are down more
than 30 percent in the past year, and Icahn Enterprises owns roughly 65 percent
of the stock, one of Mr. Icahn’s largest holdings.
In the interview this week, Mr. Icahn
said that Mr. Anderson’s statements on him and his firm are “what we consider
to be compete and total lies and extremely misleading.”