Ackman Criticizes Icahn’s IEP For Its Large Premium Following Hindenburg Report

The recent report from Hindenburg Research has stirred quite the discussions regarding Icahn’s IEP and different personalities are coming up with different allegations about the company.

Most notable among the people who have spoken about the report and its effects on the company include his old rival Bill Ackman.

The founder and CEO of the hedge fund management company Pershing Square Capital Management took another jab at the company, following the recent Hindenburg report about the company. 

Ackman expressed his thoughts regarding the company through his Twitter account on Wednesday.  In the tweet, he stated that he was ‘fascinated’ about the situation that has developed between Icahn Enterprises and the short-seller Hindenburg.

Ackman also took into consideration and looked into the fact that the company’s premium had been sustained by a considerable dividend yield. 

Ackman went on to elaborate on the fact and stated that this massive dividend yield was generated by returning capital to shareholders from outside, which was in turn funded by companies selling stocks to investors.

Bill Ackman And Carl Icahn

Through his tweets, Ackman also mentioned that adding the system was highly dependent on different factors like the maintenance of premiums and also the placidity of Icahn’s margin lenders.

While contacted, representatives of Icahn were not available for a response to the tweets from Ackman. As for him, Ackman has refused to make any statements or comments beyond his tweets about the situation of the company. 

According to the recent report published by Hindenburg, the short seller accuses Icahn’s IEP of overvaluation of the holdings of the company and also for relying on a structure that was described as ‘ponzi-like’ by the report in order to pay the dividends.

Carl Icahn, the American financier who is also credited for being the founder and controlling shareholder of Icahn Enterprise, responded to the report from Hindenburg by saying that it was ‘self-serving.’

He held strong to his argument and reiterated his defense of the company. Icahn is also regarded as one of Wall Street’s most successful investors.

The performance of the company was not appreciable so far this year as there had been a reported loss for almost more than half of its values in shares for IEP.

The company was contacted by United States Prosecutors early this month and in light of the event, the company also posted a quarterly loss in the first quarter. The value of the company’s stocks in extended training was also down by about 0.3%.

The visible feud between Ackman and Icahn is not the first time that they both have come up against each other. Similar incidents which brought the billionaires against each other took place a few years back in2 2013. During that time.

The reason behind the feud in 2013 was that the supplement company Herbalife and the investors took opposite sides of the trade.

This issue marked a notable event in the economic scenario of that time and the feud between the two was dubbed as ‘the battle of the billionaires’ in different circles and by popular media too. 

Ackmaan was very strong in stating that the performance history of IEP and also the governance structure of the company do not justify a premium.

He also added it would be rather advisable for the company to suggest a large discount to the net set value, which would be much more appropriate in the current situation. While making his statements, Ackman did not mention whether he was long or short on stock. 

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The main accusation in the Hindenburg report against Icahn Enterprises is that the company is being overvalued and that it was operating a ‘Ponzi-like’ business. The report was published on May 2, 2023. 

The reports also suggest that the units of IEP are inflated by more than 75% and the reason behind this is cited to be the questionable valuations of the holdings that the company has. The holdings of the company in the energy and real estate sector are the ones that are under major concern.

It was also noted that, unlike the peers of the company, IEP trades at a premium to the net values of the company. It should also be noted that peers of the company like Bill Ackman’s Pershing Square and Dan Lobe’s Third Point trade at a discount. 

The report also suggests that Third Point and Pershing Square might charge high fees from the customers and this could be the reason the companies trade their investments at a discount to their net asset value.

While Icahn’s closed-end fund may charge lower fees than its peers, the company currently trades at a premium which is almost 218% of its net asset value, according to the reports from December 2022.

After a comparison of this number with around 526 closed-end funds in the database of Bloomberg, it was found that IEP’s premium was the highest of all, and the number is almost double the premium of the second most expensive closed-end fund.

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