Icahn Enterprises (NASDAQ:IEP) shares are trading about 10% lower in premarket Tuesday after short-seller Hindenburg Research said it has a short position.
Icahn Enterprise is founded and run by activist investor Carl Icahn. The legendary investor has been accused by Hindenburg of making “a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well.”
Hindenburg highlights 3 reasons why Icahn shares are “inflated by 75%+”, namely:
1) IEP trades at a 218% premium to its last reported net asset value (NAV), vastly higher than all comparables;
2) clear evidence of inflated valuation marks for IEP’s less liquid and private assets; and
3) the company has suffered additional performance losses year to date following its last disclosure.
Short-seller also accused Icahn of using money taken in from new investors to pay out dividends to old investors.
“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',” it is further said in the report.
IEP shares are trading near flat year-to-date.