Carl Icahn rebuts short seller Hindenburg Research's report. It's already cost his company $6 billion in market cap.

By Ciara Linnane

Rebuttal comes shortly after disclosure of a federal probe of Icahn's investment arm

Icahn Enterprises L.P. on Wednesday issued a firm rebuttal against a short-selling report accusing it of inflating asset values that has shaved some $6 billion off the company's market capitalization in a few weeks' time.

"Hindenburg Research, founded by Nathan Anderson, would be more aptly named Blitzkrieg Research given its tactics of wantonly destroying property and harming innocent civilians," said Carl Icahn, chairman of the IEP board, in a statement.

Anderson's modus operandi is to "launch disinformation campaigns to distort companies' images, damage their reputations and bleed the hard-earned savings of individual investors. But, unlike many of its victims, we will not stand by idly. We intend to take all appropriate steps to protect our unit holders and fight back," said Icahn.

The rebuttal came just after IEP on Wednesday disclosed a federal probe into its corporate governance and other issues.

In its 10-Q filing with the Securities and Exchange Commission, IEP said the U.S. attorney's office for the Southern District of New York contacted it on May 3 seeking information relating to corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials, due diligence and other materials.

"We are cooperating with the request and are providing documents in response to the voluntary request for information," the company said in the filing.

For more: Icahn's investment company discloses federal investigation -- and earnings call yields zero questions

In his rebuttal of the Hindenburg report, Icahn acknowledged that the investment segment has underperformed in recent years, which he blamed on its bearish view of the market and large net short position.

"We recently have taken steps to reduce the short positions in our hedge book and concentrate for the most part on activism, which has served us so well in the past. We believe our existing portfolio has considerable upside potential over the coming years," he said.

Past activist campaigns by Icahn's company have generated billions of dollars for shareholders and helped boards and CEOs capture untapped value, Icahn argued, citing Reynolds, Netflix (NFLX), Forest Labs, Apple (AAPL), CVR Energy (CVI), Herbalife (HLF), eBay (EBAY), Tropicana, Cheniere (LNG) and Occidental (OXY) as examples.

"We expect that, over time, IEP's (IEP) performance will speak for itself. We have a strong balance sheet, with $1.9 billion of cash and $4 billion of additional liquidity, and stand ready to take advantage of all opportunities," said the statement.

IEP, which is 84% owned by Icahn and his son, Brett, offers exposure to Icahn's personal portfolio of public and private companies, including petroleum refineries, car-parts makers, food-packaging companies and real estate. Its unit holders are mostly retail investors, which means the market-cap loss prompted by the report has hurt those retail investors, said Icahn.

Icahn also took issue with the report's intimation that IEP's net asset value, or NAV, premium, which sets it apart from peers, is unjustified. Hindenburg compared IEP with both Dan Loeb's Third Point, which operates a similar publicly traded investment vehicle and trades at a 14% discount to its NAV, and Bill Ackman's Pershing Square, which trades at a 35% discount. "The comparison of IEP to closed-end funds as 'peers,' " said Icahn, "is a perfect example of comparing apples to oranges."

Both the Loeb and Ackman funds charge fees, including management and carried interest. But IEP charges no fees and does not pay a salary or any other form of compensation to Icahn himself.

One of the more controversial parts of the Hindenburg report was the issue of a margin loan that Icahn took against his stake in IEP. The personal indebtedness had been fully disclosed by Icahn in securities filings, but few on Wall Street seemed to take notice.

Also read:What we know about Carl Icahn's margin loan

It was first disclosed in a footnote in the February 2022 10-K to the disclosure that Icahn owned 257 million units of Icahn Enterprises. The company said 168 million of those units had been "pledged as collateral to secure certain personal indebtedness."

The filing didn't mention the purpose of the loan nor where the proceeds were directed, but it did indicate that Icahn had "sufficient additional assets to satisfy any obligations pursuant to these loans without recourse to the depositary units."

On Wednesday, Icahn said he and his affiliates "are current and in full compliance with all personal loans."

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-12-23 0748ET

Copyright (c) 2023 Dow Jones & Company, Inc.