What happened
Icahn Enterprises LP (IEP -0.12%), a diversified holding company named after activist investor and majority stakeholder Carl Icahn, is under heavy pressure Tuesday following a scathing short report by Hindenburg Research. Specifically, the depository units of the master limited partnership were down by a hefty 21.2% on sky-high volume as of 3:10 p.m. ET Tuesday afternoon.
So what
Hindenburg's report is an uncomfortable read for unitholders. In the report, Hindenburg accuses the holding company of overstating the value of certain assets on its balance sheet and operating a "Ponzi-like economic scheme" to cover its massive dividend payouts.
What's key to understand is that IEP's enormous dividend has been the primary driver behind the MLP's market-beating performance over the past decade. Armed with this insight, it's not surprising to see IEP's units crater in the wake of these allegations.
In response, Carl Icahn stated in a press release this afternoon:
We believe the self-serving short seller report published by Hindenburg Research today was intended solely to generate profits on Hindenburg's short position at the expense of IEP's long-term unitholders. 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. Today, IEP operates from a position of strength, with approximately $2 billion of cash and cash-equivalents on its balance sheet as of March 31, 2023, to execute on our strategy.
Now what
Is IEP a buy on this weakness? Although this news is hard to digest as a recent bull, I'd like to see a detailed refutation of these asset inflation allegations from IEP's chairman of the board before calling this ultra-high-yield dividend play a contrarian buy.
IEP's initial response, after all, didn't directly address many of the key issues in Hindenburg's report. Until then, it might be best to watch this story unfold from the safety of the sidelines.
