Activist investor Carl Icahn’s firm has confirmed it is under investigation by the federal government after a report from short seller Hindenburg Research accused the company of inflating its valuation.
Key things
- Shares of Icahn Enterprises fell 20% after its first-quarter earnings.
- The company confirmed it is under federal investigation.
- Icahn said he would “fight back” against short-seller Hindenburg Research.
Icahn Enterprises (IEP) said he was contacted by the U.S. Attorney’s Office for the Southern District of New York the day after Hindenburg released a report claiming that the investment company “Ponzi” dividend payouts. The report said the dividends were not supported by the funds’ cash flow or investment performance and based its short call on the company’s valuation, which it said is inflated by 75%.
Investigators are seeking information about “corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials and (a) due diligence,” Icahn Enterprises said in its most recent filing with the SEC.
IEP shares fell nearly 20% on Wednesday after the investigation was confirmed. The firm said it was cooperating with the US attorney’s office, but hit out at preliminary reports of the investigation yesterday when CEO David Willetts said the company had “full confidence” in its finances and the fundamentals of the business.
Carl Icahn also broke his silence in a statement on the company’s website yesterday, saying Hindenburg should be renamed “Blitzkrieg Research” for “unwanted destruction” of property and harming investors.
Icahn said IEP would take steps to protect its investors and “defend” itself against the claims. The firm is reducing its short positions to focus on activist investing, he said, blaming the fund’s bearish view of the market for the fund’s underperformance, he said.
“We believe our existing portfolio has significant growth potential in the coming years,” Icahn said.
