National investment loss lawyers KlaymanToskes is investigating brokerage and investment advisory firms, as well as brokers/investment advisors that recommended or sold Icahn Enterprises (NASDAQ: IEP) to their customers. Recently, Hindenburg Research alleged that Icahn Enterprises has “Ponzi-like economic structures,” which caused the stock to drop by over 40% last week.
Following the publication of a report by Hindenburg Research, which alleged that renowned activist investor Carl Icahn is mismanaging his company, shares of Icahn Enterprises (NASDAQ: IEP) plunged to a 52-week low last week. From Monday, May 1st to Thursday, May 4th, IEP shares fell by 40%. Ironically, the report highlighted the same issues that Icahn frequently critiques others for.
A regulatory filing made one day after Hindenburg Research’s report revealed that the U.S. Attorney’s office for the Southern District of New York contacted Icahn Enterprises for information related to corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials, due diligence and other materials.
According to a Prospectus Supplement filing from 2013, Morgan Stanley & Co. LLC was the sole book-running manager of Icahn Enterprises’ sale of two million depositary units.
Investors that suffered losses in Icahn Enterprises at the hands of their Morgan Stanley broker/financial advisor, and/or at any other brokerage firm, are encouraged to contact attorney Lawrence L. Klayman, Esq., for a free consultation at 888-997-9956, or lklayman@klaymantoskes.com to discuss their recovery options. All consultations are free and we do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
Icahn Enterprises is a holding company operated by Carl Icahn, who has gained a reputation as a prominent activist investor, earning the nickname “Corporate Raider,” due to his strategy of purchasing shares in companies and advocating for change. Recently, he has made activist attempts in companies such as McDonald’s, Kroger, and Illumina.
According to the company’s 10-K filing with the SEC, for the year ended December 31st 2022, Icahn and his affiliates own 85% of Icahn Enterprises. According to the filing, the company has “significant positions in various investments, which include FirstEnergy Corporation (FE), Xerox Corporation (XRX), Herc Holdings, Inc. (HRI), Newell Brands, Inc. (NWL) and Southwest Gas Holdings, Inc. (SWX)”.
According to a report published by Hindenburg Research, “Icahn has been using money taken in from new investors to pay out dividends to old investors.” The report further stated that “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’”.
Hindenburg noted Icahn Enterprises’ 15.8% dividend yield, which is purportedly the largest of any U.S. large cap name. The report argues that the high yield is not being achieved through legal means and is illegitimate.
Regarding Icahn Enterprises’ alleged Ponzi-like structure, Hindenburg’s report stated that “we think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well.”
The report states that “the largest component of Icahn’s reported NAV is a stake in Icahn’s private investment fund valued at almost $4.2 billion, or 45.4% of IEP’s gross indicative assets.” However, it notes, “Icahn disclosed that on December 31, 2022, the investment fund had net short notional exposure of 47% and 71% short equity. Given the S&P’s return of about 9.2% year-to-date, we estimate the non-notionalized short equity book has lost at least $272 million year to date.”
Hindenburg’s final conclusion determined that “at this stage, Icahn’s net worth is reliant on selling overpriced IEP units to retail investors while convincing them that they will be rewarded with a consistent, safe dividend in perpetuity, despite extensive evidence to the contrary. Confidence games never last forever—we expect Icahn Enterprises will be no different.”
KlaymanToskes believes brokerage firms and their brokers/advisors may have misrepresented the risk-factors related to investments in Icahn Enterprises, leading to unsuitable purchase recommendations.
According to a Prospectus Supplement filing from 2013, Morgan Stanley & Co. LLC was the sole book-running manager of Icahn Enterprises’ sale of two million depositary units.
Brokers/advisors who make unsuitable investment recommendations may be liable for any losses incurred by their customers. Additionally, financial professionals who make recommendations to invest in order to generate large commissions also have conflicts of interest, in violation of securities rules.
If you suffered investment losses in Icahn Enterprises due to unsuitable investment recommendations by your brokerage/advisory firm and/or at the hands of your broker/advisor, contact attorney Lawrence L. Klayman, Esq. for a free consultation at 888-997-9956 or lklayman@klaymantoskes.com.
Our firm offers services on a contingency basis, meaning we do not collect attorney’s fees unless we obtain a financial recovery for you. Disclosure: Investors that had self-directed accounts who did not rely on the advice of a financial advisor are not eligible for our services.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
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KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
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