Icahn’s investment firm reveals federal probe — and earnings call leaves no questions

Carl Icahn’s investment arm disclosed a federal investigation into its business on Wednesday, just weeks after a short seller report accused it of inflating asset values, wiping $4 billion off its market value in a single day.

In its 10-Q filing with the Securities and Exchange Commission, Icahn Enterprises LP

IEP

said the U.S. Attorney’s Office for the Southern District of New York contacted it on May 3 seeking information related to corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials, due diligence and other materials.

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

“The U.S. Attorney’s Office has not brought any claims or charges against us or Mr. Icahn in connection with the prior investigation,” the company continued. “We believe that we maintain a strong compliance program, and while we cannot make assurances and are still evaluating the matter, we do not currently believe that this investigation will have a material impact on our business, financial condition, results of operations or cash flow.” .”

Despite the stunning revelation, there were no questions from analysts during the company’s first-quarter earnings call, also held on Wednesday.

On the call, Icahn Enterprises CEO David Willetts made a brief statement about the allegations made by Nate Anderson’s Hindenburg Research and said a more complete rebuttal would be released at 11 a.m. ET.

Willetts also offered a brief overview of earnings previously released before Chief Financial Officer Ted Papapostolou gave more details.

The company has “full confidence in the integrity of its finances,” Willetts said.

Hindenburg accused Icahn Enterprises of overvaluing assets and said he believed the company’s $2 dividend may not be supported by the fund’s cash flow and investment performance, which have been negative for years, according to the report.

For more see: Icahn calls Hindenburg’s report on short sellers self-serving as his company’s stock falls $4 billion

Willetts said 90 percent of net asset values, or NAVs, are based on mark-to-market accounting or third-party audits. He said the remaining 10% is valued using historical EBITDA, or earnings before interest, taxes, depreciation and amortization.

Icahn called the short seller’s report self-serving on the day it was published and said Hindenburg’s goal was to profit in the short term from bets that the company’s stock would fall. “We stand by our public disclosures and believe that the IEP’s performance will speak for itself in the long run, as it always has,” Icahn said in the statement.

Icahn Enterprises, he said, is “operating from a position of strength” with roughly $2 billion in cash and cash equivalents on its balance sheet as of March 31 “to execute on our strategy.”

Shares of Icahn Enterprises fell 16% after reporting a surprise quarterly loss. Stocks have lost more than $6 billion since the Hindenburg Report was released.

In a footnote to its earnings report, Icahn Enterprises disclosed that after the end of the quarter, a “significant commercial high-rise tenant” was placed in default due to non-payment.

The tenant said it was unable to correct the default and the lease was terminated.

“We consider this default, together with other facts and circumstances, to be a triggering event for a potential impairment and will assess this long-lived asset for any non-cash impairment charges in the second quarter of 2023,” the footnote said.

As of March 31, 2023, the property had an NAV of $218 million, “and any potential impairment cannot be estimated at this time.”

The company’s entire real estate segment had net asset value of $457 million at the end of the quarter, according to the report.

Leave a Comment

Your email address will not be published. Required fields are marked *