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Following A Short Seller Report, Carl Icahn's Investment Empire Suffers A $6 Billion Loss In One Day

Following A Short Seller Report, Carl Icahn's Investment Empire Suffers A $6 Billion Loss In One Day
As a result of a negative report from short seller Hindenburg Research, shares of Carl Icahn's holding firm fell even further on Wednesday, causing the valuation decrease since the short seller attacked it to reach more than $6 billion.
Icahn Enterprises LP (IEP) was charged on Tuesday by Hindenburg of overvaluing its stocks and using a "Ponzi-like" structure to distribute dividends. Icahn criticised the report as being "self-serving" and defended IEP's financial claims. A plea for comment on Wednesday went unanswered.
The intraday low for IEP shares was $31.78; this was the lowest level in more than a decade. At $11.5 billion, the company is now worth 35% less than it was on Monday, the day before Hindenburg released its report.
About 85% of IEP is owned by Icahn, who has pledged over 60% of that holding as security for personal loans. According to Forbes, Icahn's fortune has been reduced by $7.5 billion as a result of the Hindenburg investigation, leaving him with a net worth of $10.8 billion.
IEP is unable to speak in-depth on its financial situation in advance because its first-quarter earnings report is due on Friday.
"Activist short attacks a few days before an issuer reports earnings are common because regulatory quiet periods can limit the issuer's ability to respond and catch them off-guard," said Josh Black, editor-in-chief of Insightia, which provides data on shareholder activism and corporate governance.
The only significant Wall Street firm that covers IEP, Jefferies Financial Group Inc., declined to comment on whether it intended to change its "buy" rating on Wednesday. Since 2013, its analyst Daniel Fannon has routinely given IEP this favourable grade. When contacted for comment, Fannon did not react.
The assault has put Icahn in unfamiliar territory. The billionaire, known for his battles with titans of the business world like AIG and McDonald's Corp, has never had his company the subject of activist investing.
In recent months, Hindenburg has targeted a number of well-known organisations, including the Jack Dorsey-led digital payments platform Block Inc. and the Indian giant Adani Group.
The Hindenburg study was hailed as a "must-read" by hedge fund veteran William Ackman, who famously feuded with Icahn over their divergent viewpoints on the dietary supplement business Herbalife.
“There is a karmic quality to this short report that reinforces the notion of a circle of life and death," he tweeted on Tuesday.

Christopher J. Mitchell

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