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

By Ciara Linnane

Shares fell 16% after news of a probe into its operations and after the company turned to a loss

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

In its 10-Q filing with the Securities and Exchange Commission, Icahn Enterprises LP 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, the offering of securities, 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 document said.

“The US Attorney’s Office has not brought any claims or charges against us or Mr. Icahn in connection with the above investigation. We believe we maintain a strong compliance program and although no assurances can be made and we are still evaluating the matter, we do not currently believe this inquiry will have a material impact on our business, financial condition, results of operations or cash flows .”

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

Instead, Icahn Enterprises LP (IEP) CEO David Willetts issued a brief statement about the allegations made by Nate Anderson’s Hindenburg Research and said a fuller rebuttal would be released at 11 a.m.

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 IEP 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 short sellers report 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 had already called the brief self-serving on the day it was published and said Hindenburg’s goal was to profit in the short term from bets that IEP shares 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.

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

IEP shares tumbled 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.

– Ciara Lynnan

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05-10-23 1053ET

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