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Carl Icahn, billionaire activist investor.
Victor J. Blue/Bloomberg
There’s no love lost between
Carl Icahn
and
Bill Ackman.
The pair of activist hedge-fund managers are sparring again, with Ackman clearly enjoying watching Icahn’s holding company come under attack by short sellers.
Icahn Enterprises
stock (ticker: IEP) continued to slide on Thursday morning, down almost 21% to around $19. That’s good for a loss of more than 60% from levels above $50 at the beginning of May, before a short-seller report targeting the shares.
Ackman posted an ultralong tweet on Wednesday evening, siding with short seller Hindenburg Research, which published a lengthy report on May 2 laying out its findings on Icahn Enterprises. Hindenburg called the stock overvalued relative to the net value of its assets—which include several fully owned businesses and a portfolio of publicly traded stocks—and argued that its generous dividend was supported only by financial engineering and was unsustainable. The famed corporate raider Icahn shot back with a combative response calling the allegations self-serving and vowing to fight back against Hindenburg.
Ackman, CEO and portfolio manager of Pershing Square Capital Management, added his voice to the squabble via tweet on Wednesday evening. He didn’t hide his joy at Icahn’s misfortune.
“Icahn’s favorite Wall Street saying: ‘If you want a friend, get a dog,’” Ackman wrote. “Over his storied career, Icahn has made many enemies. I don’t know that he has any real friends. He could use one here.”
Icahn, 87, and Ackman, 57, certainly aren’t friends, and sometimes take opposite sides on investments in a long-running feud that mixes business and personal disagreements. The managers faced off in a televised argument over
Herbalife
in 2013 that went viral among the investing community.
In its short report, Hindenburg argued that Icahn Enterprises stock could only trade a huge premium to its asset value because of its generous dividend yield—at around 16% before the declines—and that it was funding the quarterly payment by selling stock. The math works as long as the stock trades at a premium to net asset value, or NAV, which had been around 3.2 times on May 1, and as long as Icahn, who owns some 84% of the company, elects to take payment in stock, drastically reducing the required cash outlay.
“A sustained premium requires confidence in Icahn and $IEP,” Ackman wrote on Twitter. “If Icahn were to sell any shares, the stock would likely drop precipitously as the overhang of additional sales and the further resulting loss in confidence would catalyze other shareholders to exit before the deluge. The problem Icahn has is that his system has been outed by @HindenburgRes. Transparency is not the friend of $IEP.”
Ackman’s own
Pershing Square Holdings
(PSH.Netherlands), his main investment vehicle, trades at a sizable discount to its NAV.
Carl Icahn has pledged a large portion of his Icahn Enterprises shares as collateral for margin loans. Ackman pointed out that the declines in the stock may require Icahn to post more shares. He likened the situation to the highly levered Archegos Capital Management, which blew up in early 2021 after facing several margin calls from its lenders.
Ackman wrote, “$IEP reminds me somewhat of Archegos where the swap counterparties were comforted by each having relatively smaller exposures to the situation. The problem is that multiple lenders make for a more chaotic situation. All it takes is for one lender to break ranks and liquidate shares or attempt to hedge, before the house comes falling down. Here, the patsy is the last lender to liquidate.”
Ackman is only “watching from a distance,” and says he has no long or short stake in Icahn Enterprises stock. That doesn’t mean he doesn’t enjoy seeing his rival squirm.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com