[Super Rich] 'Corporate Hunter' Targeted by Short Sellers... Carl Icahn's Wealth Evaporates by 13 Trillion Won

Hindenburg Attacks Indian Conglomerate Adani
This Time Targeting 'Corporate Raider' Carl Icahn
Icahn's Wealth Evaporates by 13 Trillion Won in a Day

Editor's Note'Stand on the shoulders of giants.' This is one of the widely known investment adages. By paying attention to the eyes and mouths of the super-rich, you can see the direction of money. We deliver everything interesting about the investment trends, words, interests, and movements of the big players who move the global markets. We also deliver news that would interest investors who are currently salaried workers but dream of financial freedom. Please pay attention to the Super Rich corner, which contains vivid global investment news.

The notorious "corporate raider" and one of Wall Street's top activist investors, Carl Icahn, lost $10 billion (about 13.4 trillion KRW) in just one day due to an attack by short sellers. The group leading the short selling is Hindenburg Research, a representative short-selling investment firm on Wall Street. Icahn, who has attacked companies from Apple, the world's largest by market capitalization, to South Korea's KT&G by raising issues about governance and shareholder return policies, has now become the target of short sellers himself.

Corporate Raider Becomes Target of Short Sellers

According to Bloomberg on the 2nd (local time), Hindenburg revealed that it is "short selling" Icahn's holding company, Icahn Enterprises, claiming that it has borrowed excessively and is trading at an extremely high premium compared to its net asset value (NAV).

According to the Hindenburg report, the company's stock is trading at a premium of over 200% relative to its assets. The value of its holdings is also considered excessively inflated. Icahn stated that the value of the auto parts company held by Icahn Enterprises was $381 million (about 510 billion KRW) as of the end of last year, but one of the company's subsidiaries filed for bankruptcy in January this year. Additionally, Icahn calculated the valuation of his 90% stake in the meat packaging company Viskase at $243 million (about 330 billion KRW) as of the end of last year, but market research firm FactSet valued it at about half that amount, $114 million (about 150 billion KRW).

Hindenburg also claimed that Icahn created an economic structure similar to a "Ponzi scheme." Hindenburg criticized, "Icahn has been paying dividends to existing investors with funds received from new investors." A Ponzi scheme refers to a multi-level financial fraud where interest is paid to existing investors using money from new investors. Another issue raised was that Icahn's stock-collateralized loans are excessively high at 60% of his holdings, which means he would likely have to provide more shares as collateral if the stock price falls.

Hindenburg stated, "We believe that Wall Street legend Icahn has made the classic mistake of taking on too much leverage while facing sustained losses."

Icahn immediately pushed back. In a statement, he criticized Hindenburg's report as "self-serving," saying that "their sole purpose is to profit from short positions."

$13 Trillion Net Asset Value Vanishes in a Day... Who is Icahn?

Carl Icahn

Due to Hindenburg's attack, billionaire Icahn, who was ranked within the top 60 richest people worldwide, saw his net worth shrink rapidly, dropping out of the top 100.

On that day, Icahn Enterprises' stock closed at $40.36, down 20% from the previous trading day on the New York Stock Exchange. Including the decrease in the valuation of Icahn's 85% stake in Icahn Enterprises, his net worth shrank by more than $10 billion (about 13.4 trillion KRW) in a single day. With 41% of his net worth evaporated, Icahn's assets fell to $14.6 billion (about 19.5 trillion KRW), and his global billionaire ranking plummeted from 58th to 119th.

Icahn, who made his name as a corporate raider billionaire, suddenly became the target of short sellers. Born in 1936 into a Jewish family in New York, USA, he entered Wall Street in 1961 and became legendary in the 1980s for his hostile takeover of the U.S. airline Trans World Airlines (TWA). Since then, he became famous as an investor who invests in undervalued or cash-rich companies and intervenes in management to gain profits. He once aggressively bought Apple shares and pressured the company to repurchase shares. In South Korea, he threatened KT&G's management in 2006, earning over 150 billion KRW in sales profits and dividends within about a year. Icahn was the very figure who sparked controversy over foreign capital 'mukjil' (hit-and-run) in Korea at that time. Recently, he has concentrated his purchases of shares in McDonald's and Walt Disney and even declared war against the management of the biotech company Illumina.

Opinions on Icahn are extremely divided. While he is regarded as an "activist investor," he is also heavily criticized as a "corporate raider." Initially, Icahn was an investor who earned profits through stock trading gains. Later, he gained fame by advocating shareholder activism, but gradually, he has been criticized for focusing more on short-term gains rather than long-term growth, making him closer to a corporate raider. Due to his connection with former U.S. President Donald Trump, he was even considered as a candidate for Treasury Secretary during the Trump administration.

'Legendary Activist Investor vs. Short Seller' ? Who Will Win?

Nathan Anderson, Founder of Hindenburg Research

Wall Street is watching with keen interest to see who will emerge victorious in the battle between the legendary activist investor and the short seller. The fact that the notorious corporate raider Icahn has become the target of Wall Street's leading short-selling group draws particular attention. Hindenburg recently attacked the Adani Group, founded by Indian tycoon Gautam Adani, wiping out $58 billion (about 77.6 trillion KRW) in corporate value as a short seller.

The Wall Street Journal (WSJ) reported, "Icahn is a legendary activist investor who buys corporate shares and demands changes expected to raise stock prices, focusing relentlessly on criticizing CEOs and boards and increasing shareholder value. (In this way) the investor targeting companies (Icahn) is now being targeted by short sellers (Hindenburg) who also focus on companies." Bloomberg viewed, "Icahn Enterprises is just one of many short-selling investments where Hindenburg has scored big hits."