Reported by Keith Griffith

A notorious short-seller has targeted billionaire activist investor Carl Icahn, accusing his company of relying on ‘ponzi-like economic structures’ to pay unsustainable shareholder dividends.

Hindenburg Research on Tuesday disclosed a short position in Icahn Enterprises (IEP), and issued a report accusing the holding company of inflating the value of its units and taking on too much debt.

In a public statement, Ichan slammed the Hindenburg report a ‘self-serving’, adding: ‘We stand by our public disclosures and we believe that IEP’s performance will speak for itself over the long term as it always has.’ 

The report sets up a fight between two renowned activist investors, with Hindenburg, run by infamous short-seller Nathan Anderson, taking aim at Icahn, a Wall Street legend who made his fortune as a corporate raider.

Shares of IEP, which is controlled by Icahn and had a market valuation of roughly $18 billion at last close, plunged as much as 20 percent in afternoon trading on Tuesday.

Hindenburg’s report accuses the company of selling its units to new investors to support whopping and ‘unsustainable’ dividend payouts, which at roughly 15.8 percent are the biggest of any large US company.

‘In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors,’ the Hindenburg report said. ‘Such ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one ‘holding the bag’.’ 

The report claims that Icahn Enterprises’ rich cash dividends are ‘mathematically unsustainable’ and unsupported by the company’s free cash flow.

‘In the past 4 years alone, IEP has paid out $980 million in cash dividends, despite cumulatively burning almost $1.6 billion in free cash flow,’ wrote Hindenburg.

Read full report: https://www.dailymail.co.uk/news/article-12038145/amp/Notorious-short-seller-accuses-Carl-Icahn-running-ponzi-like-scheme.html