Carl Icahn, billionaire activist investor, waits for Donald Trump, not pictured, to talk at an election night time occasion in New York on April 19, 2016.
Victor J. Blue | Bloomberg | Getty Pictures
The U.S. Securities and Trade Fee on Monday mentioned it fined billionaire activist investor Carl Icahn and his firm $2 million, settling allegations that he didn’t disclose billions of {dollars} value of private margin loans pledged towards the worth of his Icahn Enterprises inventory.
Icahn and the publicly traded firm that bears his identify settled these expenses with out admitting or denying wrongdoing. Icahn and the corporate agreed to pay $500,000 and $1.5 million in fines, respectively, the SEC mentioned in a press launch Monday.
The SEC mentioned Icahn, who established himself as a ruthless company raider earlier than adopting the friendlier mantle of activist investor, pledged wherever from 51% to 82% of Icahn Enterprises, or IEP, shares excellent to safe billions value in margin loans with out disclosing that reality to shareholders or federal regulators.
IEP shares fell 6% by noon Monday.
Icahn’s cumulative private borrowing was as a lot as $5 billion, in accordance with an SEC consent order.
Because the efficient controlling shareholder of IEP, Icahn would have been anticipated to make what are generally known as Schedule 13D filings, which usually element what a controlling shareholder expects to do with their affect over an organization. Additionally they would have needed to embody details about any encumbrances, equivalent to margin loans, on a stake.
“The federal securities laws imposed independent disclosure obligations on both Icahn and IEP,” mentioned Osman Nawaz, a senior SEC official. “These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time.”
Icahn’s margin borrowing was highlighted in a Could 2023 report issued by quick vendor Hindenburg Analysis, which put strain on Icahn Enterprises’ inventory after alleging that the holding firm was, amongst different issues, not estimating the worth of its holdings appropriately.
Icahn amended, consolidated and disclosed his margin borrowings in July, in accordance with the SEC’s consent order, two months after the Hindenburg Analysis report.
“The government investigation that followed has resulted in this settlement which makes no claim IEP or I inflated NAV or engaged in a ‘Ponzi-like’ structure,” Icahn mentioned in an announcement to CNBC. “We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders.”
Hindenburg Analysis wrote on social media website X on Monday that IEP is “still operating a ponzi-like structure” and reiterated that it stays quick the inventory.
