Hindenburg Report Aftermath: US firm Icahn Enterprises LP Slashes Dividend By Half; Stock Ends 23% Down

American conglomerate Icahn Enterprises LP has slashed its dividend for shareholders by half in the latest quarterly results announcement. This comes after Nathan Anderson-backed Hindenburg took a jive at the company accusing it of ponzi-like dividend payouts. Icahn who is latest to bear the brunt of Hindenburg's report, reported a net loss of $269 million for the quarter ending June 30, 2023, period, widening from a loss of $128 million a year ago same quarter.

This US short seller has grabbed much attention after its infamous report on Indian billionaire Gautam Adani's conglomerate that led to billions of dollars of market rout.

On Friday, in its financial report, Carl Icahn, Chairman of IEP said, "This quarter, IEP is declaring a $1.00 per depositary unit distribution, which represents a 12% annualized yield based on yesterday's closing price and unitholders will continue to have the right to elect whether to receive cash or additional depositary units."

This would be lower than the usual payout of $2 per unit to unitholders.

The chairman also said, "We do not intend to let a misleading Hindenburg report interfere with this practice."

Icahn has a strong track record of paying dividends. As per the financial statement, IEP has issued distributions for 73 continuous quarters.

Also, Carl highlighted that over the last 23 years, IEP has paid significant distributions to unitholders. He added, "I believe it is compelling that if you purchased 1,000 IEP depositary units in January 2000, for $7.63 per unit and elected to take all distributions in cash as they were paid, you would have received approximately $76,000 in cash distributions and would have still owned the 1,000 units."

The company has fixed September 27, 2023, as the date for a payout of $1 per depositary unit to depositary unitholders of record at the close of business on August 18, 2023.

Depositary unitholders will have until September 15, 2023, to make a timely election to receive either cash or additional depositary units, it added.

At the start of May month, Hindenburg report mentioned that it found that the $18 billion market cap holding company's units are inflated by 75%+ due to 3 key reasons: (1) IEP trades at a 218% premium to its last reported net asset value (NAV), vastly higher than all comparables (2) we've uncovered clear evidence of inflated valuation marks for IEP's less liquid and private assets (3) the company has suffered additional performance losses year to date following its last disclosure.

The short seller's report added Icahn Enterprises' current dividend yield is ~15.8%, making it the highest dividend yield of any U.S. large-cap company by far, with the next closest at ~9.9%.

It accused Icahn of using money taken in from new investors to pay out dividends to old investors. It added, "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."

Noteworthily, Hindenburg did predict that Icahn would eventually trim its dividend payout.

The US short seller's note said, "Given limited financial flexibility and worsening liquidity, we expect Icahn Enterprises will eventually cut or eliminate its dividend entirely, barring a miracle turnaround in investment performance."

Further, in mid-May, Hindenburg also shed some light on Carl Icahn's margin loans, which it strongly suspects represent a near-term critical threat to IEP unitholders.

Coming back to the financial results, Icahn's earnings took a hit across verticals in the second quarter of 2023.

During the June 2023 quarter, the company's revenues were at $2.5 billion and a net loss of $269 million, or a loss of $0.72 per depository --- compared to revenue of $3.5 billion, a net loss of $128 million and or $0.41 per depository unit in June 2022 quarterly period.

In the latest quarter, Icahn's adjusted EBITDA was $34 million compared to $126 million during the prior year period. While indicative net asset value decreased to $5.0 billion as of June 30, 2023, compared to $5.6 billion as of December 31, 2022. The change in indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries which are not included in our GAAP earnings.

On Friday, IEP stock listed on tech-heavy Nasdaq, ended at $25.09, nosediving by 23.23%.