Carl Icahn Loses Nearly $2 Billion After Firm’s Stock Price Plummets 25%

Topline

Shares of Icahn Enterprises plunged 25% Friday morning after Carl Icahn’s firm cut its quarterly distribution in half, leading to a $1.7 billion drop in the 87-year-old billionaire’s net worth—months after infamous short-seller Hindenburg accused the company of “ponzi-like” behavior.

Carl Icahn attends the New York City Police Foundation’s 32nd Annual Gala at Waldorf=Astoria on … [+] March 16, 2010 in New York City. Photo by Billy Farrell

Patrick McMullan via Getty Images

Key Facts

The company was trading at $24.50 a share as of 11:35 a.m. Friday, down from $32.68 when the market closed Thursday, representing a nearly 53% drop since the start of the year.

In its first reduction since 2011, Icahn Enterprises cut its quarterly dividend from $2 to $1 Friday, and its namesake founder published a letter saying the firm would refocus on corporate activism, which built Ichan’s fortune in the first place.

The $1 dividend represents a 12% annualized yield, the company noted. The holding company also reported a net loss of $269 million between April and June on Friday, up from $128 million in losses over the same period last year.

The sharp losses in the company’s share price come after Hindenburg Research, led by Nathan Anderson, took a public short position in May, alleging Icahn Enterprises was “significantly overvalued” and propped up by a “ponzi-like economic structure” with “inflated” investment returns, a claim he re-stated in a Tweet Friday morning: “We remain short.”

Hindenburg’s allegations led to a Justice Department inquiry, and Icahn said the short was “wantonly destroying property and harming innocent civilians.”

Forbes Valuation

On Friday, Icahn’s net worth fell 17% from $10.1 billion to $8.4 billion, placing him at No. 263 on Forbes’ real-time billionaires list. His fortune fell over 35% on the day the Hindenburg news broke in May, from $18.3 billion to $12 billion.

Crucial Quote

“I believe the second quarter partially reflected the impact of short-selling on companies we control or invest in, which I attribute to the misleading and self-serving Hindenburg report concerning our company,” Icahn said of the second-quarter losses.

Key Background

Carl Icahn holds 85% of his company’s publicly traded units and the rest—about $2.1 billion of share capital—is held by its retail investor base. He’d pledged a majority of his units of Icahn Enterprises to “secure certain personal indebtedness,” the company said, and the “risky form of financing” was called out in Hindenburg’s report. The billionaire last month set up a plan to separate his personal loans from the trading price of Icahn Enterprise shares, the Wall Street Journal reported. The new loan agreements promise he will provide an additional $2 billion of his personal money as collateral, and he agreed to a three-year repayment plan with lenders that include Morgan Stanley and Bank of America.

Tangent

A similar story played out earlier this year when Hindenburg Research disclosed a short position against India’s Adani Group, controlled by Gautam Adani, who has slid from the world’s third to 24th richest person in the time since. Hindenburg accused Adani of fraud, alleging Adani Group’s companies had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” Adani Group CFO Jugeshinder Singh called the report “a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.” Adani’s fortune has slid from $120 billion in January to $54 billion as of Friday.