MW Carl Icahn's investment arm's stock slides after company again halves dividend
By Ciara Linnane
Icahn is proposing to acquire additional shares of portfolio company CVR Energy
Icahn Enterprises LP's stock tumbled 7% early Friday, after Carl Icahn's investing arm again halved its dividend, this time to help raise the funds to expand his stake in portfolio company CVR Energy.
Icahn Enterprises $(IEP)$ confirmed that it wants to boost the CVR stake to 81.3% from 66.3% currently via a tender offer, as reported earlier by the Wall Street Journal.
CVR said last month it would suspend its third-quarter dividend, as unplanned outages and a weak macro environment pressured earnings. That news sent IEP shares down 14% the day after it was announced.
CVR's stock has fallen 45% in the year to date, underperforming the S&P 500 SPX, which has gained 25%.
"Rarely have I seen a stock market with such extreme valuations - with some companies trading at unjustifiable premiums and others being massively undervalued," Icahn said Friday. "These undervalued situations have created great opportunities for activists."
IEP had cash and equivalents of about $2.3 billion as of Oct. 31, he said. To maintain that war chest, the company is halving its quarterly dividend to 50 cents per unit from $1.00, he said.
IEP will then buy the extra 15 million CVR shares $(CVI)$ at a per-share price of $17.50, a 6% premium above Thursday's closing price, the company said in a statement.
IEP already halved the dividend last year after a short-seller's report alleged the company was overstating values and could not afford its then-$2 dividend.
IEP is majority-owned by Icahn and his son Brett. The company offers exposure to Icahn's personal portfolio of public and private companies - including car-parts makers, food-packaging companies and real estate, alongside energy companies. Its unit holders are mostly retail investors.
A report by short-seller Hindenburg Research led to bruising losses for IEP after it was published in May of 2023. The report also revealed that Icahn himself had made billions of dollars from personal loans against shares, or units, that he owned in Icahn Enterprises.
Icahn immediately rebutted the report and accused Hindenburg of being misleading and self-serving.
From the archives (May 2023): Carl Icahn rebuts short-seller Hindenburg Research's report. It's already cost his company $6 billion in market cap.
Further details (May 2023): Carl Icahn admits he was wrong to take a huge short position on the market that lost $9 billion
IEP also reported third-quarter earnings early Friday, showing net income of $22 million, after a loss of $6 million a year ago. Revenue fell to $2.221 billion from $2.991 billion a year ago. There are too few analysts offering coverage of the stock to provide meaningful consensus estimates.
The company said indicative net asset value fell by $423 million from the second quarter, as positive performance in the funds of $192 million was offset by the decline in the value of CVI of $249 million, a decline in automotive services of 4193 million and the distribution to unitholders of $113 million.
"We have replaced senior leadership in our Automotive Services business and believe we are seeing early signs of recovery," the company said.
The new dividend is payable on or about Dec. 26 to unitholders of record a of Nov. 18.
IEP's stock is down 25% in the year to date and is down 34% over the last 12 months.
-Ciara Linnane
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November 08, 2024 07:21 ET (12:21 GMT)
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