Short Seller Challenges Carl Icahn’s Business, Alleges Overvaluation

On Tuesday, iconic activist investor Carl Icahn faced a significant challenge as prominent short seller Hindenburg Research accused his conglomerate, Icahn Enterprises, of being substantially overvalued. The allegations caused a 20 percent drop in Icahn Enterprises shares to a three-year low, marking their busiest trading day ever.

Hindenburg Research claimed that Icahn’s conglomerate is operating a “Ponzi-like economic structure,” asserting that money from new investors is being used to pay dividends to existing investors. The short seller contended that Icahn sells partnership units to new investors to fund dividend payouts, raising concerns about the financial structure.

While Reuters could not independently verify Hindenburg’s claims, the impact on Icahn Enterprises was notable. Shares plummeted 24 percent to $38.39 on the busiest trading day in the firm’s history, with more than 10 million shares traded, according to Refinitiv Eikon data.

Icahn Enterprises, based in Sunny Isles Beach, Florida, is a high-profile target for Hindenburg Research, known for its earlier actions against India’s Adani Group and Jack Dorsey-led Block Inc. Hindenburg suggested that Icahn’s units are overvalued by more than 75 percent, emphasizing a 218 percent premium to the last reported net asset value (NAV).

The short seller also questioned the close relationship between investment bank Jefferies and Icahn, noting the assumptions made by Jefferies’ research regarding Icahn’s dividends and its involvement in the unit sale. Jefferies CEO Richard Handler’s close relationship with Icahn was highlighted as well.

Icahn, a Wall Street legend, did not respond to requests for comment. The short seller suggested that Icahn, at 87, may have taken on excessive leverage amid sustained losses, a combination that rarely ends well. Icahn’s history includes pressing for changes at various companies, and most recently, engaging in a proxy fight with Illumina Inc.

Short sellers, like Hindenburg Research, typically sell borrowed securities with the aim of buying them back at a lower price, profiting from a decline in the stock’s value. The allegations against Icahn Enterprises have stirred considerable market activity and discussions about the financial practices of this influential investor.

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