Icahn Enterprises LP’s stock was trading down 0.7% Thursday, after short seller Hindenburg Research intensified his bearish bet on Carl Icahn’s investing arm, and said he’s now taking aim at its bonds.
Hindenburg, run by Nate Anderson, said the latest disclosures made Wednesday by IEP raised more questions about Icahn’s personal margin loans, or debt, from the company as well as portfolio losses at IEP. The short seller also said disclosures, intended to counter Hindenburg’s May 2 report, failed to address the issues raised.
The original report raised questions about asset valuations and Icahn’s own borrowing from the company using his units as collateral.
Hindenburg Research, which typically aims to profit from the decline in value of the shares of companies that it writes negative reports about, kicked off such a bet against Icahn Enterprise earlier this month but has now also set its sights on the company’s debt.
For more, see: Icahn calls Hindenburg short-seller report self-serving, as market value of his company’s stock plunges by $4 billion
“As noted in our earlier report, Icahn had not disclosed “basic metrics around his margin loans like loan to value (LTV), maintenance thresholds, principal amount, or interest rates.” This is still the case,” said Hindenburg.
IEP has not said why Icahn had borrowed against his holdings. The company didn’t respond to a request for comment on Thursday’s report.
On Wednesday, IEP disclosed a federal probe into its corporate governance and other issues. It is unclear if that investigation by the Southern District of New York is related to Hindenburg’s report and allegations, but the news put further pressure on the stock.
The bonds, which have been more active than usual since the first report, took another leg down on Thursday, as the attached charts from market-data company BondCliQ show, as Hindenburg said it has taken a short position in them.
The longest-dated bonds, the 4.375% notes that mature in February of 2029, were trading at around 75 cents on the dollar, as of midmorning.
IEP corporate bond prices. Source: BondCliQ
IEP bond volumes. Source: BondCliQ
Icahn owns 84% of IEP shares and disclosed in a 2022 filing with the Securities and Exchange Commission that he had pledged more than 181 million units, or 60% of his holdings, for margin loans.
On Wednesday, IEP
IEP,
said that pledge had increased to 202 million units, which Hindenburg estimates was valued at $6.5 billion as of Wednesday’s close, based on his calculations.
The battle between the iconic activist investor and the short seller has clobbered IEP’s stock, which has fallen 39% in the month to date at a cost of more than $6 billion of market cap.
Also read: What we know about Carl Icahn’s margin loan
IEP posted an unexpected loss on Wednesday of $270 million, or 75 cents per depositary unit, for the first quarter, after income of $323 million, or $1.06 a unit, in the year-earlier period. The FactSet consensus was for income of 19 cents.
Revenue fell to $2.758 billion from $2.968 billion a year ago, ahead of the $2.559 billion FactSet consensus. Analysts on its conference call didn’t pose any question of executives who briefly outlined the quarterly numbers.
The company on Wednesday also issued a rebuttal of the May 2 report from Hindenburg and said it would “take all appropriate steps to protect our unit holders and fight back.”
Icahn acknowledged that the investment segment has underperformed in recent years, which he blamed on its bearish view of the market and large net short position, which it has now scaled back.
IEP offers exposure to Icahn’s personal portfolio of public and private companies, including petroleum refineries, car-parts makers, food-packaging companies and real estate. Its unit holders are mostly individual investors, which means the market-cap loss prompted by the report has hurt those individual investors, said Icahn.
