Billionaire activist investor Carl C. Icahn, 88, has agreed to pay a $2 million fine to settle charges brought by the U.S. Securities and Exchange Commission (SEC) for failing to disclose that he had pledged his personal stock holdings as collateral for billions of dollars in loans. The SEC’s charges, announced on Monday, highlight Icahn’s use of more than half of his shares in Icahn Enterprises as collateral, a practice that went unreported for years.
The SEC stated that Icahn, who owns approximately 86% of Icahn Enterprises, only disclosed the pledges in February 2022, despite having used the shares as collateral since late 2018. While pledging stock as collateral is a common practice, it introduces additional risks for other shareholders. If the borrower defaults on the loan, the lender may sell the pledged shares, potentially driving down the stock’s value.
This settlement marks another significant challenge for Icahn, whose business practices have come under intense scrutiny following a report by Hindenburg Research, a prominent short-seller. Hindenburg accused Icahn Enterprises of operating “Ponzi-like economic structures” and paying dividends it could not afford, leading to a sharp decline in the company’s stock price. Shares of Icahn Enterprises have plummeted more than 60% since the report was released, with a further drop of over 1% following the SEC’s announcement.
Read more about the Hindenburg Report on Icahn Enterprises.
Icahn has strongly denied Hindenburg’s allegations, calling the report “false” and accusing the firm of profiting from its short position at the expense of ordinary investors. Despite the settlement with the SEC, Icahn maintains that the charges are unrelated to the Hindenburg report and notes that the issues were corrected more than a year before the report’s release.
Hindenburg, however, continues to criticize Icahn Enterprises, asserting in a tweet on X that the company still operates a “Ponzi-like structure” and has failed to execute a $500 million stock buyback announced last year. The short-seller remains committed to its position against Icahn Enterprises, further complicating the billionaire’s ongoing challenges.
