Icahn Short Sellers Reap Only a Fraction of Billionaire’s $6 Billion Stock Drop

(Bloomberg) — Hindenburg Research is targeting Carl Icahn’s investment firm as its latest victim, but short-sellers haven’t made much off the company’s $6.3 billion wipeout largely because Wall Street is so reluctant to bet against the billionaire.

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Icahn Enterprises LP, founded by the activist investor, has slumped 35% since the short-seller report, wiping out billions in market value over the past two days. While the stock’s tumble has blasted Icahn’s personal wealth, short sellers are seeing a sliver of those gains to the tune of $9 million in mark-to-market profit, S3 Partners data show.

Those paltry returns are because Icahn Enterprises is one of the least shorted stocks in terms of shares available for trading among companies with market values above $1 billion.

Roughly 740,000 shares are currently sold short, down from a 2023 peak of 1.23 million shares shorted in March, according to Ihor Dusaniwsky, S3 Partners’ managing director of predictive analytics.

It’s unclear how large of a short position Hindenburg has and the data imply that “it is unlikely” for Hindenburg to make up the bulk of the shares shorted, Dusaniwsky said, meaning “there were shorts in this trade well before the Hindenburg report.” Hindenburg didn’t respond to an email seeking additional comment.

Of course, there are other ways to bet against Icahn’s empire. Profits may be much greater than $9 million when accounting for options trading. The stock’s slide toward $30 has pulled a range of put options deep into the money, likely bringing robust returns for investors who played the sharp decline.

Bearish bets in the options market have been piling up since early April. Total put open interest more than doubled from April 6 through Monday, before the report was released, according to data compiled by Bloomberg. Implied volatility and the put skew increased, signaling traders were paying more to bet on a share-price decline.

Icahn hit back at Hindenburg hours after the report came out, saying that the firm’s performance would “speak for itself over the long term as it always has.” Carl Icahn holds a stake in the holding company of more than 88%, data compiled by Bloomberg show.

Shares fell 19% Wednesday, following Tuesday’s record 20% tumble, to close at the lowest since December 2010. More than 33 million shares changed hands over the two-day slide, more than 25-times the average over the past year.

Hindenburg, a New York-based investment firm, has waged campaigns against increasingly high-profile companies and leaders. Tuesday’s report followed recent attacks on the billionaire Gautam Adani’s business empire and Jack Dorsey’s Block Inc.

Explainer: What’s Short Selling? Who Is Hindenburg Research?

Returns for short-sellers that joined Hindenburg in betting against Block have been lucrative, according to S3 data. Since the March 23 report, short sellers are up $126.3 million in mark-to-market profits, Dusaniwsky said. Nearly 5% of Block shares available to trade are currently sold short, meaning plenty of investors are banking on further downside, data show.

While the bets have been lucrative for short sellers on the day reports are published — Hindenburg has driven a flurry of double-digit drops in their targets — the longer-term returns are a touch more mixed. Wagers against Genius Brands International Inc. and Ideanomics Inc. resulted in hefty returns as shares tanked while New Pacific Metals Corp. and Establishment Labs Holdings Inc. traded higher three months after the report.

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