The fusillades Carl Icahn has aimed at corporate boardrooms have made him one of the most famous and feared activist investors on Wall Street. Much of his firepower derives from a humble source: a small oil refining and nitrogen fertiliser company in the US heartland.
CVR Energy will pay out $30mn in dividends to the investor’s Icahn Enterprises next month, on top of about $300mn sent over the past 12 months. Since 2012 Icahn Enterprises has collected $3.2bn in dividends from CVR, a Financial Times analysis shows. Its $2bn stake has become the single most valuable asset inside Icahn’s publicly traded financial empire.
The refiner also acted as critical ballast to Icahn Enterprises over the past year as it fended off a short seller attack that caused the conglomerate to lose two-thirds of its value. The value of its CVR holding enabled Icahn to renegotiate a personal margin loan that had been secured by Icahn Enterprises’ plunging shares.
“CVR Energy is a cash cow,” said Nick Moglia, a credit analyst with CreditSights. The refiner’s dividend payments to Icahn Enterprises more than cover the cash the latter then pays out in large dividends to its own minority shareholders, he said. “It is a huge benefit for Icahn.”
Icahn took control of the refiner in 2012 after one of many battles he has waged during half a century of investing.
Many on Wall Street expected him to quickly flip CVR for a tidy profit. Icahn instead ousted its board but forged a connection with chief executive Jack Lipinski, father of Olympic gold medallist figure skater Tara Lipinski, and held on to the stock. Icahn Enterprises owns 66 per cent of CVR.
That decision has proven valuable for Icahn during an otherwise brutal stretch in which his broader investment portfolio has lost money for a decade, mostly as a result of costly hedges the activist had used to protect himself against a severe market plunge.
The Financial Times last year calculated Icahn had lost about $9bn on the hedges, outweighing the $6bn he had made on activist bets from 2014 to 2024.
Last week Icahn Enterprises reported its net assets had dropped about 7 per cent in the fourth quarter to $4.8bn. On Wednesday the company said it lost $684mn in 2023, weighed down by short positions that suffered as financial markets soared.
Icahn said in a press release last week: “Given our hedge portfolio and the frequent long time horizon of our complex activist investments, our returns can often be lumpy. There are also times when our hedge book can go against us and overwhelm the performance of our long positions.”
He added: “While there are never guarantees, we expect our returns to improve back to historical levels where our long positions far outperform our hedges.”
When Icahn acquired CVR he was near the height of his powers after conducting bruising campaigns against corporate giants such as Texaco and Trans World Airlines. His holding company managed a sprawling portfolio that included billion-dollar-plus stakes in companies such as Apple, Netflix, Forest Labs and Herbalife, while he was plotting bids to take over Clorox and Dell.
Though many of his takeover efforts failed, Icahn succeeded in gaining control of CVR’s board by taking his fight directly to its shareholders, offering to buy their stock directly.
Icahn then unleashed a torrent of dividends from the refiner, though he famously refused to pay the legal and investment banking fees that CVR had racked up to repel his takeover.
His $2.6bn investment came as the shale revolution was transforming the US into the world’s largest oil producer. The surge in supply led to gluts in the region surrounding CVR’s two refineries in Coffeyville, Kansas and Wynnewood, Oklahoma, allowing the company to buy crude oil at knockdown local prices and sell refined petroleum products at higher national prices, generating outsized profits.
Within just a few years, CVR had paid Icahn and its minority shareholders billions in dividends through regular and special payments.
Icahn later became a vocal critic of a federal mandate to mix biofuels into petrol supplies or buy credits to make up the shortfall, a stance which attracted controversy when he briefly served as a special adviser to then president Donald Trump. Despite the costs of complying with the mandate, CVR last week reported a record annual net profit of $769mn.
The company did not respond to requests for comment.
By contrast, many other businesses inside Icahn’s empire, which span automotive services, real estate and even sausage packaging, have struggled to generate meaningful earnings.
“[CVR] is possibly the greatest trade he ever made,” said a financial executive who has followed Icahn’s bet for more than a decade. “It’s certainly up there in this modern activism era in terms of the best trades anyone has done.”
The short seller Hindenburg Research, led by Nathan Anderson, last May characterised Icahn Enterprises’ dividend as unsustainable and critiqued heavy personal debts Icahn had taken against the shares in his own company.
Hindenburg’s report revealed Icahn had borrowed against most of his 85 per cent shareholding in Icahn Enterprises, debts that came with the risk that he could be forced to sell shares to repay the loans, potentially driving down their price. The risk became more pronounced when Icahn Enterprises’ shares plunged after the short seller’s attack.
Icahn restructured the margin loan this past summer. Lenders changed the terms so that it was tied to the value of Icahn Enterprises’ quarterly net assets and not its volatile shares, according to securities filings. The company’s stake in CVR, worth about $2.3bn at the time, represented about a quarter of the conglomerate’s overall value.
“CVR is the key thread holding what’s left of his empire together,” Anderson told the FT earlier this year.
In a written statement in response to Anderson, Icahn said: “It’s hard to understand his logic. As of year-end, CVI constituted only approximately 20 per cent of IEP’s gross indicative [net asset value]. Additionally, we keep the CVI position significantly hedged.” He declined to comment further.
CVI and IEP are the stock symbols of CVR and Icahn Enterprises, respectively. Icahn’s hedges include short positions against individual stocks and energy commodities, according to securities filings.
S&P Global considers CVR an important part of its calculation of the conglomerate’s indebtedness.
“It holds a lot of weight when we calculate loan-to-value, or our measure of leverage,” said Jennifer Panger, the lead S&P analyst covering Icahn Enterprises. “It is a significant portion of the portfolio value. It is publicly listed, so on one hand it is very liquid, but changes in the market value of the company can change the overall portfolio value.”
Having withstood the assault by Hindenburg, Icahn has recently gone on the offensive. He has won board seats at utility AEP and airline JetBlue after building large stakes in the companies, and continues to pressure genomics specialist Illumina after ousting some of its directors last year.
“We have continued to pick our spots and find new, exciting activist opportunities,” Icahn said in a news release.
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