In a tumultuous turn of events, Icahn Enterprises L.P.’s stock plunged over 6% to close at $19.47 on Tuesday, edging dangerously close to its 52-week low of $18.03. This startling descent was triggered earlier this year when short seller Hindenburg Research published a damning report about the company, accusing it of overstating values and paying dividends it could not afford. The fallout from the report has been significant, resulting in the stock plummeting for six of the past seven days and closing at its lowest since October 20, 2004.

The beleaguered investment firm, helmed by billionaire activist Carl Icahn, has been grappling with major setbacks. Following the Hindenburg report, Icahn Enterprises’ market capitalization suffered a staggering loss of billions of dollars. Adding to the company’s woes, it was forced to slice its dividend in half earlier this month, a move that saw the stock shed 30% of its value. The New York Times highlighted the ensuing turmoil for Icahn and his publicly traded investment arm, including the revelation that Icahn had borrowed money from his own company, a detail that had slipped past Wall Street’s notice.

Icahn Enterprises Plunges After Scathing Hindenburg Report

Shares of Icahn Enterprises L.P. fell by more than 6% to close at $19.47 on Tuesday, nearing its 52-week low of $18.03, which was hit after Hindenburg Research published a damaging report about the company. The stock has seen a downward trend for six of the last seven days, ending Tuesday’s session at its lowest since October 20, 2004.

Fallout from Hindenburg Report

The report from Nate Anderson-backed Hindenburg accused Icahn Enterprises of overvaluing assets and paying dividends it could not afford. The result was a significant plummet in the company’s market capitalization, with the stock losing billions of dollars in value. In response to the allegations, Icahn Enterprises halved its dividend earlier this month.

Mark Stevens, author of "King Icahn: The Biography of a Renegade Capitalist," commented on the situation, stating, "It is very, very embarrassing for Carl because this guy beat him and beat him at his own game." On August 4, the day the dividend reduction was announced, the stock lost 30% of its value.

Icahn Enterprises Loan Agreements and Portfolio

Hindenburg’s report also disclosed that billionaire activist Carl Icahn borrowed money from his own company, an overlooked detail disclosed in a footnote to financials. Icahn later adjusted loan agreements with banks, decoupling his personal loans from the trading price of his company’s shares.

Icahn Enterprises, 84% owned by Icahn and his son, Brett, provides access to Icahn’s portfolio of public and private companies, including petroleum refineries, car-parts manufacturers, food-packaging companies, and real estate. The fund’s unit holders are primarily retail investors.

Icahn’s Market Position and Future Strategy

Despite a raging bull market around him, Icahn has expressed skepticism for many years and has shorted the stock market as a hedge against his long activist positions. His investment fund had a short exposure of 142% going into 2021, according to Securities and Exchange Commission filings.

More recently, Icahn conceded that his short position was a mistake and committed to returning to his core strategy of activism. He believes this move will free up billions of dollars of shareholder value for himself and others.

The Impact of Icahn’s Activism

Icahn told the Times that his activist campaigns at multiple companies, including Apple Inc., eBay Inc., PayPal Holdings Inc., Forest Labs, Herbalife Ltd., and Netflix Inc., have helped create $300 billion in additional value for the shareholders of those companies.

Despite this, Icahn Enterprises’ stock has lost 61% of its value in the year to date, while the S&P 500 has gained 15%.

Takeaways

The case of Icahn Enterprises highlights the impact that short seller reports can have on a company’s stock performance. The scathing report by Hindenburg Research led to a significant drop in the company’s stock value and has raised questions about Icahn’s strategy and decision-making. Moving forward, it will be interesting to see how Icahn’s return to his core strategy of activism will play out and whether it will be able to restore shareholder value and investor confidence in the company.