Activist investor Carl Icahn has expressed regrets over his investment firm Icahn Enterprises LP (NYSE:IEP) short-selling strategy in recent years, saying they hedged far more than was necessary.
He wrote in a letter to unitholders along with the release of the firm's second-quarter financial results: “As compelling as the above numbers are, they would have been far more impressive had we not strayed over the past several years from our activist methodology and shorted (hedged) far more than was necessary.
“While we made money on the long side through our activism efforts, our returns have been overwhelmed by our overly bearish view of the market and related oversized short (hedge) positions.”
He added that over the past six months, Icahn Enterprises has significantly reduced its hedges and that, going forward, it intends to “stick to our knitting and focus on our activist strategy while remaining appropriately hedged”.
Meanwhile, Icahn Enterprises stock tumbled on Friday after it announced it would be slashing its dividend payout from its usual $2 per depository unit to $1, just months after Hindenburg Research initiated a short position on the firm and accused it of over-reporting its finances and using a “Ponzi-like” structure to pay dividends.
For 2Q, Ichan Enterprises posted a net loss of $269 million or $0.72 per depository unit, up from a net loss of $128 million or $0.41 per depository unit in the year-ago quarter.
Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $34 million, down from $126 million in 2Q 2022.
Its net asset value decreased from $5.6 billion on December 31, 2022, to $5 billion as of June 30, 2023.
Icahn said in a statement that the results “partially reflected the impact of short-selling on companies we control or invest in, which I attribute to the misleading and self-serving Hindenburg report concerning our company”.
Icahn Enterprises shares traded down 33.4% at US$21.70 in pre-market trading.
Contact the author at emily.jarvie@proactiveinvestors.com
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