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Carl Icahn’s embattled investment conglomerate has slashed its quarterly dividend by half in a bid to conserve cash after a short seller criticised the payouts as unsustainable.
Icahn Enterprises said on Friday that it would cut its payout from $2 to $1 per share, sending stock in the New York-listed company tumbling more than 20 per cent.
Shares in the conglomerate, which is home to a refining and car parts business as well as a portfolio of hedge fund-style investments that the octogenarian billionaire manages, have been under pressure since short seller Hindenburg Research published its report in May.
Hindenburg, which took aim at Indian billionaire Gautam Adani earlier this year, claimed that Icahn Enterprises was overvalued and holding assets at an inflated value on its balance sheet. Icahn, one of Wall Street’s best known activist investors, dismissed the report as self-serving.
The hefty cut in the payout came as the conglomerate reported a second-quarter net loss of $269mn and wrote down the value of some of its assets.
The group’s investment portfolio lost $500mn in the quarter, taking its overall hit this year to almost $1bn, as it was caught out by the strong rebound in equity markets.
During the final years of the bull market, Icahn had a huge bet that the market would crash, a set of trades that cost the group almost $9bn over roughly six years, the Financial Times has previously reported.
Icahn said in May that he would trim his large market hedges and instead focus his financial firepower on the activist campaigns that have made him one of the most feared activist investors.
Last month he was forced to restructure personal loans he took out against shares in Icahn Enterprises after the report from Hindenburg sent the stock sharply lower.
As part of an agreement with five lenders, including Bank of America, Bank of Montreal and Deutsche Bank, Icahn’s margin debt will be converted into a three-year loan that requires him to make a $500mn principal payment by September 1 and to pledge almost all his Icahn Enterprises stock as collateral.
The agreement also requires Icahn to make $87.5mn in quarterly principal payments from September 2024 and to repay the outstanding $2.5bn when the loan expires in 2026.
Nathan Anderson, head of Hindenburg Research, said on Friday that the fund retains its bet against Icahn Enterprises, writing on Twitter that it had predicted in May that the group would “eventually cut or eliminate its dividend entirely, barring a miracle turnaround in investment performance”.
Icahn pointed to what he said were the large dividends that shareholders have received from the group over the past two decades. “We do not intend to let a misleading Hindenburg report interfere with this practice,” he said.
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