MW Carl Icahn's investment arm's stock slides 9% on report company to again halve dividend

By Ciara Linnane

Icahn will cut dividend to 50 cents a share to raise funds to expand its stake in majority-owned CVR Energy

Icahn Enterprises LP's stock fell 9% early Friday, after a report that Carl Icahn's investing arm is planning to cut its dividend to help raise the funds to expand his stake in portfolio company CVR Energy.

Icahn Enterprises $(IEP)$, which is due to post third-quarter earnings later Friday, plans to propose boosting its stake in the refiner by more than 20%, according to drafts of statements that Icahn and his firm plan to release Friday that were viewed by The Wall Street Journal.

IEP currently owns a 66% stake in CVR, which 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%.

IEP plans to make its tender offer for the extra CVR shares $(CVI)$ at a per-share price of $17.50, a 6% premium to Thursday's closing price, according to the statements cited by the Journal.

IEP said CVR, with a market value of about $1.7 billion, is currently undervalued and that stockholders would benefit from being able to cash out at a premium, according to the statements.

Icahn is planning to halve the IEP dividend to 50 cents a share. The company already halved it last year after a short-seller report alleged the company was overstating values and could not afford its then $2 dividend.

Icahn is reported to be impressed by current valuations.

"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 in the statement seen by the Journal. "These undervalued situations have created great opportunities for activists."

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.

The 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 worth of 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

-Ciara Linnane

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November 08, 2024 06:32 ET (11:32 GMT)

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