May 2 (Reuters) - Hindenburg Research, the short investor whose reports on companies have erased a big chunk of their value, criticized Icahn Enterprises LP (IEP) on Tuesday over the reporting of its finances, leading to a 25% drop in the shares of activist investor Carl Icahn's firm.
Hindenburg's new report, which accused IEP of overvaluing its holdings and relying on a "Ponzi-like" structure to pay dividends, erased $3.3 billion off Icahn's net worth, leaving him with an estimated $14.3 billion, according to Forbes.
Icahn said in an IEP statement that Hindenburg's "self-serving" report was aimed at generating profits at the expense of IEP's long-term shareholders.
"We stand by our public disclosures and we believe that IEP's performance will speak for itself over the long term as it always has," Icahn said.
Icahn's Sunny Isles Beach, Florida-based company is the latest high-profile target of Hindenburg, which earlier this year went after India's Adani Group, knocking more than $100 billion in value off the conglomerate's shares. Last month, the short-seller took aim at Jack Dorsey-led Block Inc.
Hindenburg said IEP's units are overvalued by more than 75% and that "IEP trades at a 218% premium to its last reported net asset value (NAV), vastly higher than all comparables."
The short-seller also took aim at the close relationship between investment bank Jefferies and Icahn. Hindenburg noted that Jefferies' research assumes that Icahn’s dividends will be paid in perpetuity even in a worst-case scenario, that it has acted as a bookrunner for its unit sale and that CEO Richard Handler has a close relationship with Icahn.
The bank did not immediately respond to a Reuters request for comment.
Hindenburg said peers like Dan Loeb’s Third Point and Bill Ackman’s Pershing Square trade at a discount to their respective NAVs. NAV is a key gauge of a fund's performance, measuring the market value of securities held by the fund.
"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 short-seller said.
Icahn, 87, has pressed for changes at a number of companies over the years including Herbalife. In August, fast-food giant McDonald's Corp amended its board and replaced a director targeted by Icahn.
Most recently, Icahn has been involved in a proxy fight with Illumina Inc to push the U.S. life sciences firm to unwind its 2021 buyout of Grail.
"In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors," said Hindenburg, claiming Icahn sells partnership units to new investors to support dividend payouts to existing investors.
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