Icahn Enterprises L.P.'s stock (IEP) took a major hit in premarket trade on Friday, plummeting by 28%. The significant drop followed the company's announcement of a reduction in its quarterly distribution from $2 to $1. The news came as a surprise to investors as the company reported an unexpected quarterly loss and revenue that fell below consensus estimates.
Potential Impact of Short-Selling and Hindenburg Report
In a statement, Chairman Carl Icahn expressed his belief that the second quarter results were partially influenced by short-selling on companies controlled or invested in by Icahn Enterprises. He attributed this impact to the Hindenburg report, which he described as misleading and self-serving. Published in May, the report was released by short seller Hindenburg Research and accused IEP of inflating asset values. It also revealed that Carl Icahn himself had borrowed from the company, a fact that had previously gone unnoticed by Wall Street analysts. This damaging report caused a significant decrease in IEP's market capitalization. Icahn firmly denied the allegations made in the report and recently disclosed that he has entered into a three-year loan agreement with personal lenders to resolve his borrowings.
Ensuring Future Distributions
Despite the setback, Icahn emphasized that IEP has been consistently distributing payments for 73 consecutive quarters and does not intend for a "misleading" report to interfere with this practice. Moving forward, the decision to pay future distributions will be determined by the board of directors on a quarterly basis. Factors taken into consideration will include current economic conditions, business performance, and other relevant metrics at the time of distribution declaration.
IEP's stock has experienced a year-to-date decline of 35%.
