MJP –
Icahn is currently facing charges from the SEC for allegedly concealing personal margin loans in the amount of billions of dollars, which were pledged against the value of his company.
Billionaire activist investor Carl Icahn and his companies were fined $2 million by the U.S. Securities and Exchange Commission on Monday.
Carl Icahn, who became famous for his bold takeovers of corporations and later for his work as an activist investor, settled with the SEC without taking responsibility.
Fines of $1.5 million and $500,000 were agreed upon by Icahn and his company, Icahn Enterprises (IEP), as part of the settlement.
According to the SEC, Icahn had borrowed billions of dollars in margin loans using a large chunk of his IEP shares as collateral, which ranged from 51% to 82% of the total number of shares.
IMAGE – CNBC
A breach of disclosure rules occurred since neither shareholders nor the SEC were notified. By Monday lunchtime, IEP shares had fallen 6% on the news of the settlement.
According to the SEC’s compliance order, Icahn borrowed up to $5 billion for his use.
Filing Schedule 13D reports was a requirement of Icahn’s position as controlling shareholder of IEP. These reports detail the goals of controlling shareholders and reveal any liabilities associated with their ownership, like margin loans.
It was a violation of these regulations that Icahn did not do.
“Both Icahn and IEP were obligated to disclose independently under the federal securities laws,” stated Osman Nawaz, a senior official at the SEC.
Icahn pledged more than 50% of IEP‘s outstanding shares at any given moment, according to these disclosures.
Hindenburg Research, a short seller, revealed Icahn’s massive use of margin borrowing in a study they released in May 2023.
Among other things, the study said that Icahn Enterprises (IEP) was inflating the worth of its assets.
The stock price of IEP was heavily impacted by this information, according to CNBC.
The SEC’s cooperation order states that Icahn revised and disclosed his margin borrowings in July, two months following the Hindenburg report.
The claims that Icahn engaged in a “Ponzi-like” structure or inflated the NAV of IEP were disputed in a statement he sent to CNBC.
He was relieved to finally get the issue resolved and assured the unit holders that IEP would keep acting in their best interest.
Nonetheless, Hindenburg Research stuck to its guns regarding X (formerly Twitter), restating its negative view of IEP and asserting that the firm was acting in a “Ponzi-like” way.
