Icahn Enterprises stock continues to decline. Bill Ackman weighs in.

There is no love lost between Carl Icahn and Bill Ackman. The pair of activist hedge fund managers are arguing again, with Ackman clearly enjoying watching Icahn Holdings get attacked by short sellers.

Icahn Enterprises (stock ticker: IEP) stock continued to slide Thursday morning, down nearly 21% to around $19. That’s good for a loss of more than 60% from the above $50 levels at the beginning of May, before a short sell report targeting stocks.

Ackman Post a very long tweet On Wednesday night, it sided with the short-sighted research firm Hindenburg, which published a lengthy report on May 2 laying out its findings on Icahn Enterprises. Hindenburg called the stock overvalued relative to the net worth of its assets — which include several wholly owned companies and a portfolio of publicly traded stocks — and argued that its generous dividends were only backed by financial engineering and were unsustainable. The company’s notorious striker Icahn responded with a combative response, calling the allegations self-serving and vowing to fight against the Hindenburg.

Ackman, CEO and portfolio manager at Pershing Square Capital Management, added his voice to the dispute via a tweet on Wednesday night. He did not hide his joy at Icahn’s misfortune.

“Icahn’s favorite Wall Street says, ‘If you want a boyfriend, get a dog,'” Ackman wrote. “Over the course of his career, Icahn has made many enemies. I don’t know he has real friends. He could use one here.”

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Icahn, 87, and Ackman, 57, are certainly not friends, sometimes taking opposite sides in investments in a long-running feud that mixes business and personal differences. The directors faced off in a televised controversy over Herbalife in 2013 that spread among the investment community.

In its short report, Hindenburg argued that Icahn Enterprises shares could only trade at a huge premium to the value of their assets because of their generous dividend yield — at about 16% before dips — and that they were financing the quarterly payment by selling shares. The math works as long as the shares are trading at a premium to net asset value, or NAV, which was about 3.2 times on May 1, and as long as Icahn, who owns about 84% of the company, opts to pay in stock, which significantly reduces the cash outlay required.

“A sustainable premium requires trust in Icahn and $IEP,” Ackman wrote on Twitter. “If Icahn sells any shares, the stock is likely to drop sharply because the surplus of additional sales and the resulting additional loss in trust will motivate other shareholders to get out before the flood. Icahn’s problem is that his system has been dismantled by @HindenburgRes. Transparency is not a friend of $IEP.” .

Ackman’s main investment vehicle, Pershing Square Holdings (PSH.Net Netherlands), is trading at a deep discount to NAV.

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Carl Icahn pledged a significant portion of Icahn Enterprises stock as collateral for the margin loans. Ackman noted that declines in the stock may require Icahn to post more shares. He likened the situation to Archegos Capital Management, which imploded in early 2021 after facing numerous margin calls from lenders.

Ackman wrote, “The $IEP somewhat reminds me of Archegos where the swap counterparties were relieved by each being exposed to a relatively lesser position. The problem is that multiple lenders make the situation more messy. All it takes is for one lender to break ranks and liquidate.” stocks or tries to hedge before the house goes under. Here, Patsy is the last liquidated lender.”

Ackman is only “watching from afar,” and says he has no stake, long or short, in Icahn Enterprises stock. This is not to say that he does not enjoy seeing his rival writhe.

Write to Nicholas Jasinski at [email protected]

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