Short-Seller Blasts Icahn Again, Raises Suspicion: 'Where Is This Money Coming From?'

Short-seller Hindenburg Research continues to scrutinize the business practices of Carl Icahn and his namesake conglomerate, Icahn Enterprises LP IEP.

What Happened: After publishing a bearish report last week accusing Icahn of mismanagement, Hindenburg — under the helm of Nathan Anderson — continues to levy fraud allegations against Icahn Enterprises and claims that investors are at risk.

"We strongly suspect — based on our analysis that we had not previously published — that Carl Icahn has borrowed billions, and reinvested some, or all the proceeds, into his own investment funds," Hindenburg stated in a new report published on May 11.

See Also: Icahn Enterprises Fires Back At Hindenburg's Ponzi-Like Scheme Allegations - 'Intended Solely To Generate Profits'

"These funds subsequently generated significant losses, which could pose an overleveraging risk for both Carl Icahn himself, and IEP unit holders."

Hindenburg cites annual reports indicating that Icahn added $3.4 billion in cash to his investment funds since 2014.

"Where did the money come from?" the firm asked. "We strongly suspect Carl Icahn pledged his IEP units for billions in margin loans and reinvested up to $3.4 billion in proceeds into his investment funds, which generated losses of roughly 53% from 2014 to 2022."

Why It Matters: The allegations, which Icahn denies, come as federal prosecutors investigate Icahn Enterprises.

Hindenburg's latest report won't do any favors for Icahn Enterprise stock, which traded lower Wednesday after the company disclosed that it's under investigation by federal prosecutors.

Icahn's Response: Calls to Icahn Enterprises CFO Ted Papapostolou were not returned as of press time.

Icahn Enterprises responded to Hindenburg's original report on Wednesday, May 10.

"Hindenburg Research, founded by Nathan Anderson, would be more aptly named Blitzkrieg Research given its tactics of wantonly destroying property and harming innocent civilians. Mr. Anderson's modus operandi is to launch disinformation campaigns to distort companies' images, damage their reputations and bleed the hard-earned savings of individual investors," Icahn said in the response.

Icahn Enterprises said it intends to take appropriate steps to protect shareholders and fight back against the claims.

Separately, Icahn also addressed the investigation currently underway by the U.S. Attorney’s Office for the Southern District of New York.

"We are cooperating with the request and are providing documents in response to the voluntary request for information," the company said. "The U.S. Attorney’s office has not made any claims or allegations against us or Mr. Icahn with respect to the foregoing inquiry."

Q1 Earnings: This week, Icahn Enterprises reported first-quarter revenue of $2.6 billion. The New York-based company turned in a quarterly loss of 75 cents per share, which was down significantly from earnings of $1.06 per share year-over-year. 

IEP Price Action: Icahn Enterprises shares were down 4.72% in pre-market trading, hovering at about $32.22 at the time of writing, according to Benzinga Pro.

Next: Why Icahn Enterprises Shares Are Falling Sharply

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