“Activist Investor Carl Icahn Accused of Operating a Pyramid Scheme, Hindenburg Research Reveals”

Activist investor Carl Icahn accused of creating a pyramid scheme

The Hindenburg Research document says that Icahn Enterprises significantly inflates the value of its assets. At the same time, the high dividend yield of the company is achieved at the expense of new investors.

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Hindenburg Research, an analytics firm known for high-profile disclosures of public companies, has shorted billionaire investor Carl Icahn’s Icahn Enterprises. Hindenburg experts pointed out in his review to the fact that the value of the holding’s assets is inflated compared to peer companies, and the “Ponzi-like” economic scheme is used when paying dividends.

At auction on Tuesday, May 2, Icahn Enterprises shares fell 23.88% to $38.16 per share, according to trading data as of 20:31 Moscow time.

Analysts at Hindenburg Research found that the assets included in the Icahn conglomerate are overvalued by more than 75%, and Icahn Enterprises itself is trading at a premium of 218% to the previously announced net asset value (NAV). In comparison, Dan Loeb’s Third Point and Bill Ackman’s Pershing Square, on the contrary, trade at discounts to this indicator.

Moreover, according to Hindenburg, Aikan’s holding uses schemes that are similar to the Ponzi pyramid. Analysts point out that an investor is selling shares of his company to new investors in order to support the payment of dividends to existing investors.

How writes CNBC, citing FactSet data, gives Icahn Enterprises a dividend yield of around 15.8%, the highest of any major U.S. company. At the same time, such profitability is unjustified in terms of “cash flow and investment performance,” the article says. document Hindenburg Research.

“We believe that Wall Street legend Icahn made the classic mistake of taking on too much leverage in the face of constant losses – a combination that rarely ends well,” the review reads.

Hindenburg Research accused investment bank Jefferies of being biased due to close ties to Icahn himself. Jefferies is the only major Wall Street firm to have research coverage on Icahn stock, while consistently rating it as a Buy. One study by Jefferies says that Icahn’s dividends will be paid in perpetuity even under the worst-case scenario. Meanwhile, in order to maintain a high level of dividends, Icahn Enterprises was forced to constantly sell its assets – and Jefferies investment bank was the only organizer of such transactions. Finally, Jefferies CEO Richard Handler has a close relationship with Carl Icahn.

In March Hindenburg Research stated, which made a bet on the fall of the shares of the fintech company Jack Dorsey Block. The research firm reported that the payment platform inflated the number of users and underestimated the cost of customer acquisition. In addition, the study stated that former Block employees estimated that 40–75% of the accounts they viewed were fake, involved in fraud, or additional accounts associated with one person.

Icahn Enterprises (IEP) is a holding company with a market capitalization of approximately $14 billion, managed by activist investor Carl Icahn, who, along with his son Brett, owns about 85% of the company. Icahn Enterprises is headquartered in Sunny Isles Beach, Florida. The conglomerate develops business in many sectors of the economy, including energy, automotive, food packaging and real estate.