Icahn’s Investment Fund Cuts Dividend to Boost Stake in CVR Energy
Dividend Reduction Signals Shift in Investment Strategy
Billionaire activist investor Carl Icahn’s investment fund, Icahn Enterprises LP, has announced a significant reduction in its dividend payout, from $1 per unit to $0.50 per unit, in the third quarter. This move is part of a broader strategy to increase its stake in CVR Energy Inc., a Texas-based refiner.
CVR Energy Shares Plummet After Suspending Dividend
CVR Energy’s shares have taken a hit, tumbling 24% on October 29 after the company suspended its cash dividend for the third quarter. This decision was seen as a major blow by Bloomberg Intelligence analyst Brett Gibbs, given the company’s annualized dividend yield had led refining peers. The company’s shares have slumped 45% so far this year, giving it a market value of about $1.7 billion.
Icahn Sees Undervalued Opportunities
Icahn believes that CVR Energy’s shares are undervalued and represent an attractive investment opportunity. He notes that the current stock market is characterized by extreme valuations, with some companies trading at unjustifiable premiums and others being massively undervalued. These undervalued situations have created great opportunities for activists, according to Icahn.
Tender Offer to Boost Stake in CVR Energy
IEP plans to launch a tender offer to buy as many as 15 million additional CVR shares for $17.50 apiece, representing a 5.9% premium to CVR’s last close in New York. This move is aimed at increasing IEP’s stake in CVR Energy to about 81%, up from 66%.
Dividend Cut to Fund Other Investment Opportunities
The dividend cut is also intended to help fund other investment opportunities within and outside the IEP portfolio. Icahn believes that this strategy will enable the fund to take advantage of undervalued situations and create value for shareholders.
Third-Quarter Earnings Report
IEP reported third-quarter revenue of $2.79 billion, down 7% from the same period in 2023. Adjusted earnings before interest, taxes, depreciation, and amortization dropped 25% from a year earlier to $183 million. The fund’s indicative net asset value stood at about $3.6 billion as of September 30, a decrease of $423 million from the end of the previous quarter.
Settlement with US Regulator
Earlier this year, Icahn and IEP reached a settlement with the US regulator, agreeing to a $2 million combined fine on insufficient disclosure related to Icahn’s pledging with IEP shares. The settlement followed an investigation by the Securities and Exchange Commission after a report by short-seller Hindenburg Research accusing the firm of inflating asset prices.
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