SUNNY
ISLES BEACH, Fla., May 10, 2023
/PRNewswire/ -- Icahn Enterprises L.P. (Nasdaq: IEP) ("IEP" or
the "Company") today issued the following statement in response to
a short seller's misleading and self-serving report published
on May 2, 2023:
Chairman of the Board, Carl C.
Icahn, stated: "Hindenburg Research, founded by Nathan Anderson, would be more aptly named
Blitzkrieg Research given its tactics of wantonly destroying
property and harming innocent civilians. Mr. Anderson's modus
operandi is to launch disinformation campaigns to distort
companies' images, damage their reputations and bleed the
hard-earned savings of individual investors. But, unlike many of
its victims, we will not stand by idly. We intend to take all
appropriate steps to protect our unitholders and fight back.
"We believe that the greatest paradigm for investment success is
activism. We have a long-held belief that at far too many companies
today there is no real corporate governance and therefore no
accountability and, as a result, companies are not nearly as
productive as they should be. The failure of our system presents an
opportunity for activists, like us, who are willing to spend the
energy, the time and the money to breach the walls that far too
many corporations have built to entrench themselves. Over the
years, we have generated hundreds of billions of dollars of value
for stockholders through activist campaigns where we were able to
guide boards and CEOs to take the steps necessary to enhance the
value of their companies. Examples of these, to name a few, are
Texaco, Reynolds, Netflix, Forest
Labs, Apple, CVR Energy, Herbalife, eBay, Tropicana,
Cheniere, and Occidental.
"In more recent years the performance of our investment segment
has been lower than our historical averages. A key detractor has
been our bearish view of the market, causing us to have a large net
short position. We recently have taken steps to reduce the short
positions in our hedge book and concentrate for the most part on
activism, which has served us so well in the past. We believe our
existing portfolio has considerable upside potential over the
coming years.
"We expect that, over time, IEP's performance will speak for
itself. We have a strong balance sheet, with $1.9 billion of cash and $4 billion of additional liquidity, and stand
ready to take advantage of all opportunities. As we consider recent
events, we are left asking why Mr. Anderson issued this
inflammatory report, doing great harm to retail investors. He has
admitted to shorting stock before issuing his report, believing
that the stock price would temporarily decline. Was that his only
goal? Whatever the motive, IEP intends to vigorously defend itself
and its unitholders."
Mr. Icahn and his affiliates own approximately 84% of the
Company's outstanding units. As a publicly traded limited
partnership, IEP offers its unitholders the ability to invest
alongside Mr. Icahn as co-owners of IEP and, in so doing, to
participate in the Company's activist strategy. To be clear, Mr.
Icahn receives no fees, salary or any other compensation from
IEP.
The day after the report was published, IEP's market
capitalization fell by $6.6 billion
for our unitholders. As recently as May 4,
2023, the American Bankers Association said that "the harm
caused by short selling that runs counter to economic fundamentals
ultimately falls on small investors, who see value destroyed by
others' predatory behavior." The good news for IEP's investors is
that we have Carl, the liquidity, the strategy and the know-how to
fight back.
The following response sets the record straight with respect to
the misleading and self-serving claims.
IEP's Board of Directors is focused on preserving an
optimal liquidity position for the benefit of all unitholders.
Investors are attracted to this commitment, which includes a
long-term view of the Company's liquidity needs and a willingness
to return capital in a fiscally responsible manner.
- IEP's Board continuously evaluates various strategies for
improving its liquidity position. As a fundamental element of this
strategy, the Company seeks to raise debt and equity capital when
market conditions warrant and when it believes that all of the
Company's unitholders will benefit from it doing so. These capital
raises are not always driven by an immediate need for liquidity,
but instead with a long-term view towards maintaining a strong
liquidity position and, if appropriate, making distributions to its
unitholders. In this vein, since 2019, the Company has issued units
to the public under its ATM program as one of a number of
strategies to enhance its liquidity position. In issuing units
under the ATM program, IEP welcomes new investors to the IEP
family, who are excited to benefit from the core investment
strategies and the visionary leadership of Mr. Icahn that IEP
uniquely offers.
- Beginning in 2005, IEP's Board of Directors has issued a
quarterly distribution to its unitholders. With exceptions, Mr.
Icahn has generally taken distributions in units. As he takes
distributions in units, it further aligns Mr. Icahn with the public
unitholders. Notably, the Company issued quarterly distributions
long before the ATM program was in place and the Company's units
have traded at a premium to their net asset value since 2014.
- IEP is a diversified holding company that consolidates
operating businesses and interests in investment funds (some of
which are not wholly owned, which creates non-controlling
interests). For example, IEP consolidates 100% of Viskase, of which
IEP owns 90% and there is a non-controlling interest of 10%. Due to
this complex structure, IEP's consolidated cash flow statement
cannot be used in isolation to determine the cash flows at the
holding company segment. To increase disclosure to investors, IEP
began disclosing holding company segment specific cash flows in the
fiscal year 2018 Form 10-K. From 2016 to 2022, our holding company
segment net increase in cash flows was $1.6
billion.
IEP's net asset value (NAV) determinations are based on
accepted valuation methodologies.
- As of December 31, 2022, IEP used
standard industry valuation methods in which the NAV determination
for 69% of its gross assets is based on market value, the NAV
determination for 14% of its gross assets is based on book value,
the NAV determination for 8% of its gross assets is based on market
comparable valuation techniques, and the NAV determination for 9%
of its gross assets is based on the assistance of third-party
valuation consultants.
|
|
December 31,
2022
|
|
March 31,
2023
|
($ in
millions)
|
|
$
|
% of
Gross
|
|
$
|
% of
Gross
|
Market-valued
|
|
|
|
|
|
|
Holding Company
interest in Funds
|
|
4,184
|
|
|
4,013
|
|
CVR Energy
|
|
2,231
|
|
|
2,334
|
|
Total
Market-Valued
|
|
6,415
|
69 %
|
|
6,347
|
70 %
|
|
|
|
|
|
|
|
Book
Valued
|
|
|
|
|
|
|
Real Estate
Holdings
|
|
455
|
|
|
457
|
|
WestPoint
Home
|
|
156
|
|
|
161
|
|
Vivus
|
|
241
|
|
|
237
|
|
Other HoldCo net
assets
|
|
20
|
|
|
130
|
|
Automotive
Parts
|
|
381
|
|
|
-
|
|
Total
Book-Valued
|
|
1,253
|
14 %
|
|
985
|
11 %
|
|
|
|
|
|
|
|
Third-Party
Valuations
|
|
|
|
|
|
|
PepBoys Owned Real
estate
|
|
831
|
|
|
831
|
|
Total Third-Party
Valuations
|
|
831
|
9 %
|
|
831
|
9 %
|
|
|
|
|
|
|
|
Market
Comparables
|
|
|
|
|
|
|
Viskase
|
|
243
|
|
|
285
|
|
PepBoys (excl Owned
Real Estate)
|
|
490
|
|
|
573
|
|
Total Market Comp.
Valuations
|
|
733
|
8 %
|
|
858
|
10 %
|
|
|
|
|
|
|
|
Gross
Assets
|
|
9,232
|
|
|
9,021
|
|
|
|
|
|
|
|
|
Less: HoldCo
debt
|
|
(5,309)
|
|
|
(5,309)
|
|
Add: HoldCo cash and
cash equivalents
|
|
1,720
|
|
|
1,868
|
|
|
|
|
|
|
|
|
Indicative Net Asset
Value
|
|
5,643
|
|
|
5,580
|
|
- With respect to the specific examples the short seller
identified in its report, each criticism is fundamentally
flawed:
-
- Viskase – IEP utilizes an accepted market comparable
valuation technique to determine its NAV. As we have disclosed in
our earnings materials, it is based on 9.0x Adjusted EBITDA for the
prior twelve months. The reason we don't use the trading price of
Viskase in making our NAV determination is that Viskase trades on
the over-the-counter (OTC) pink sheets. As can be seen below, there
are days, even weeks, where Viskase doesn't trade on the OTC.
![Viskase Viskase](https://mma.prnewswire.com/media/2074127/Icahn.jpg)
-
-
- Auto Plus – Auto Plus was valued based on its GAAP book
value, which was part of the Auto Segment in IEP's audited
financial statements for the year ended December 31, 2022. Additionally, we disclosed
that, after the end of our fiscal year, Auto Plus filed for
bankruptcy protection, which would reduce the assets and negatively
impact the net sales of our Automotive segment in future periods.
In connection with the March 31, 2023
financial statements, you will see that the investment in Auto Plus
was deconsolidated and we recorded a non-cash charge in connection
with this deconsolidation in conformity with GAAP.
- Real Estate Segment – The NAV for the assets held within
IEP's real estate segment is determined based on accepted book
value methodologies in accordance with GAAP. Three examples were
provided in the report. Combined, these assets (one of which we've
never owned) contribute less than 1% of gross net asset value.
- IEP NAV has had several noticeable examples where the sale
price ultimately was far in excess of the previously stated NAV.
The following chart compares the sales price of significant assets
to the mark prior to the asset sale:
($ in
millions)
|
NAV
Before Sale
|
Net
Consideration
from Sale
|
Δ
|
PSC
Metals
|
$141
|
$323
|
$182
|
Ferrous
Resources
|
$166
|
$463
|
$297
|
American
Railcar Industries
|
$547
|
$831
|
$284
|
Tropicana
|
$1,509
|
$1,566
|
$57
|
Federal-Mogul
|
$1,690
|
$2,000
|
$310
|
American
Railcar Leasing
|
$1,029
|
$1,808
|
$779
|
IEP is a publicly traded master limited
partnership.
- The comparison of IEP to closed-end funds as "peers" is a
perfect example of comparing apples to oranges. The short seller
report compares the publicly managed vehicles of Third Point and
Pershing Square to IEP.
- Both Third Point and Pershing Square are investment advisers
that manage closed-end funds. Both charge significant fees,
including management, carried interest and other fees. The
Hindenburg report itself notes that "Pershing Square charges a 1.5%
management fee and 16% performance fee. Third Point charges
a 1.25% management and 20% performance fee." The
short seller report goes on to further state "We were unable to
locate granular disclosure on Icahn's investment fund fees but we
reached out to the company for clarification." The reason they
cannot find such information is because there are no such fees – a
fact the most basic due diligence and review of our public filings
would have revealed to an honest reader. IEP is not encumbered by
any fees, salary or any other compensation payable to Mr.
Icahn. To repeat, there is no comparison between our activist
strategy and operating businesses and the closed end funds managed
by others.
IEP's unique structure and history explain why the market
values its units at a premium to NAV: it provides all investors an
opportunity to invest alongside a legend of Wall Street as
co-owners of IEP and, in doing so, to participate in the Company's
activist business management and investment strategy.
- First, public unitholders of IEP truly invest
alongside the iconic Mr. Icahn as co-owners of IEP. A
significant portion of Mr. Icahn's personal net worth is
represented by his ownership interest in IEP. Therefore, public
investors can take comfort in Mr. Icahn's true alignment with their
interests.
- Second, IEP investors buy the same units that Mr. Icahn
holds. Like any investor, Mr. Icahn may use his IEP equity as an
asset in any appropriate manner. Given his alignment with
unitholders and the significant amount of his net worth held
through IEP, Mr. Icahn pledges IEP units as collateral for
borrowings. Mr. Icahn has advised that he and his affiliates
are current and in full compliance with all personal
loans.
- Third, Mr. Icahn is deeply invested in IEP and, with his
affiliates, owns 84% of all outstanding units of IEP. The remaining
public 16% is held almost entirely by individual investors and not
wealthy institutions. This fact highlights how the short seller
report aims to destroy the hard-earned savings of retail and public
investors.
IEP does not intend to abandon its unitholders – it will defend
their interests in all appropriate manners.
Icahn Enterprises L.P., a master limited partnership, is a
diversified holding company engaged in seven primary business
segments: Investment, Energy, Automotive, Food Packaging, Real
Estate, Home Fashion and Pharma.
Caution Concerning Forward-Looking Statements
This release may contain certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995, many of which are beyond our ability to control or
predict. Forward-looking statements may be identified by words such
as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning and
include, but are not limited to, statements about the expected
future business and financial performance of Icahn Enterprises and
its subsidiaries. Actual events, results and outcomes may differ
materially from our expectations due to a variety of known and
unknown risks, uncertainties and other factors, including risks
related to economic downturns, substantial competition and rising
operating costs; risks related to the severity, magnitude and
duration of the COVID-19 pandemic and its impact on the global
economy, financial markets and industries in which our subsidiaries
operate; the impacts from the Russia/Ukraine conflict, including economic
volatility and the impacts of export controls and other economic
sanctions, risks related to our investment activities, including
the nature of the investments made by the private funds in which we
invest, declines in the fair value of our investments as a result
of the COVID-19 pandemic, losses in the private funds and loss of
key employees; risks related to our ability to continue to conduct
our activities in a manner so as to not be deemed an investment
company under the Investment Company Act of 1940, as amended, or to
be taxed as a corporation; risks related to short sellers and
associated litigation and regulatory inquiries; risks related to
our energy business, including the volatility and availability of
crude oil, other feed stocks and refined products, declines in
global demand for crude oil, refined products and liquid
transportation fuels as a result of the COVID-19 pandemic,
unfavorable refining margin (crack spread), interrupted access to
pipelines, significant fluctuations in nitrogen fertilizer demand
in the agricultural industry and seasonality of results; risks
related to the success of the proposed spin-off of the fertilizer
business; risks related to our automotive activities and exposure
to adverse conditions in the automotive industry, including as a
result of the COVID-19 pandemic and the Chapter 11 filing of our
automotive parts subsidiary; risks related to our food packaging
activities, including competition from better capitalized
competitors, inability of our suppliers to timely deliver raw
materials, and the failure to effectively respond to industry
changes in casings technology; supply chain issues; inflation,
including increased costs of raw materials and shipping, including
as a result of the Russia/Ukraine conflict; interest rate increases;
labor shortages and workforce availability; risks related to our
real estate activities, including the extent of any tenant
bankruptcies and insolvencies; risks related to our home fashion
operations, including changes in the availability and price of raw
materials, and changes in transportation costs and delivery times;
and other risks and uncertainties detailed from time to time in our
filings with the Securities and Exchange Commission. Additionally,
there may be other factors not presently known to us or which we
currently consider to be immaterial that may cause our actual
results to differ materially from the forward-looking
statements. Past performance in our Investment segment is not
indicative of future performance. We undertake no obligation to
publicly update or review any forward-looking information, whether
as a result of new information, future developments or
otherwise.
Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in
evaluating its performance. These include non-GAAP EBITDA and
Adjusted EBITDA. EBITDA represents earnings from continuing
operations before interest expense, income tax (benefit) expense
and depreciation and amortization. We define Adjusted EBITDA as
EBITDA excluding certain effects of impairment, restructuring
costs, certain pension plan expenses, gains/losses on disposition
of assets, gains/losses on extinguishment of debt and certain other
non-operational charges. We present EBITDA and Adjusted EBITDA on a
consolidated basis and on a basis attributable to Icahn Enterprises
net of the effects of non-controlling interests. We conduct
substantially all of our operations through subsidiaries. The
operating results of our subsidiaries may not be sufficient to make
distributions to us. In addition, our subsidiaries are not
obligated to make funds available to us for payment of our
indebtedness, payment of distributions on our depositary units or
otherwise, and distributions and intercompany transfers from our
subsidiaries to us may be restricted by applicable law or covenants
contained in debt agreements and other agreements to which these
subsidiaries currently may be subject or into which they may enter
into in the future. The terms of any borrowings of our subsidiaries
or other entities in which we own equity may restrict dividends,
distributions or loans to us.
We believe that providing EBITDA and Adjusted EBITDA to
investors has economic substance as these measures provide
important supplemental information of our performance to investors
and permits investors and management to evaluate the core operating
performance of our business without regard to interest, taxes and
depreciation and amortization and certain effects of impairment,
restructuring costs, certain pension plan expenses, gains/losses on
disposition of assets, gains/losses on extinguishment of debt and
certain other non-operational charges. Additionally, we believe
this information is frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies that have issued debt. Management uses, and believes that
investors benefit from referring to, these non-GAAP financial
measures in assessing our operating results, as well as in
planning, forecasting and analyzing future periods. Adjusting
earnings for these charges allows investors to evaluate our
performance from period to period, as well as our peers, without
the effects of certain items that may vary depending on accounting
methods and the book value of assets. Additionally, EBITDA and
Adjusted EBITDA present meaningful measures of performance
exclusive of our capital structure and the method by which assets
were acquired and financed.
EBITDA and Adjusted EBITDA have limitations as analytical tools,
and you should not consider them in isolation, or as substitutes
for analysis of our results as reported under generally accepted
accounting principles in the United
States, or U.S. GAAP. For example, EBITDA and Adjusted
EBITDA:
- do not reflect our cash expenditures, or future requirements
for capital expenditures, or contractual commitments;
- do not reflect changes in, or cash requirements for, our
working capital needs; and
- do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt.
Although depreciation and amortization are non-cash charges, the
assets being depreciated or amortized often will have to be
replaced in the future, and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements. Other
companies in the industries in which we operate may calculate
EBITDA and Adjusted EBITDA differently than we do, limiting their
usefulness as comparative measures. In addition, EBITDA and
Adjusted EBITDA do not reflect the impact of earnings or charges
resulting from matters we consider not to be indicative of our
ongoing operations.
EBITDA and Adjusted EBITDA are not measurements of our financial
performance under U.S. GAAP and should not be considered as
alternatives to net income or any other performance measures
derived in accordance with U.S. GAAP or as alternatives to cash
flow from operating activities as a measure of our liquidity. Given
these limitations, we rely primarily on our U.S. GAAP results and
use EBITDA and Adjusted EBITDA only as a supplemental measure of
our financial performance.
Use of Indicative Net Asset Value Data
The Company uses indicative net asset value as an additional
method for considering the value of the Company's assets, and we
believe that this information can be helpful to investors. Please
note, however, that the indicative net asset value does not
represent the market price at which the depositary units trade.
Accordingly, data regarding indicative net asset value is of
limited use and should not be considered in isolation.
The Company's depositary units are not redeemable, which means
that investors have no right or ability to obtain from the Company
the indicative net asset value of units that they own. Units may be
bought and sold on The Nasdaq Global Select Market at prevailing
market prices. Those prices may be higher or lower than the
indicative net asset value of the depositary units as calculated by
management.
See below for more information on how we calculate the Company's
indicative net asset value.
|
|
|
|
|
March 31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
(in
millions)(unaudited)
|
Market-valued
Subsidiaries and Investments:
|
|
|
|
Holding
Company interest in Investment Funds(1)
|
$ 4,013
|
|
$ 4,184
|
CVR
Energy(2)
|
2,334
|
|
2,231
|
Total market-valued
subsidiaries and investments
|
$
6,347
|
|
$
6,415
|
|
|
|
|
Other
Subsidiaries:
|
|
|
|
Viskase(3)
|
$ 285
|
|
$ 243
|
Real
Estate Holdings(1)(4)
|
457
|
|
455
|
WestPoint
Home(1)
|
161
|
|
156
|
Vivus(1)
|
237
|
|
241
|
|
|
|
|
Automotive
Services(5)
|
573
|
|
490
|
Automotive
Parts(1)(6)
|
-
|
|
381
|
Automotive
Owned Real Estate Assets(7)
|
831
|
|
831
|
Icahn
Automotive Group
|
1,404
|
|
1,702
|
|
|
|
|
Total other
subsidiaries
|
$
2,544
|
|
$
2,797
|
Add: Other
Holding Company net assets(8)
|
130
|
|
20
|
Indicative Gross
Asset Value
|
$
9,021
|
|
$
9,232
|
Add:
Holding Company cash and cash equivalents(9)
|
1,868
|
|
1,720
|
Less:
Holding Company debt(9)
|
(5,309)
|
|
(5,309)
|
Indicative Net Asset
Value
|
$
5,580
|
|
$
5,643
|
Indicative net asset value does not purport to reflect a
valuation of IEP. The calculated Indicative net asset value does
not include any value for our Investment Segment other than the
fair market value of our investment in the Investment Funds. A
valuation is a subjective exercise and Indicative net asset value
does not necessarily consider all elements or consider in the
adequate proportion the elements that could affect the valuation of
IEP. Investors may reasonably differ on what such elements are and
their impact on IEP. No representation or assurance, express or
implied, is made as to the accuracy and correctness of Indicative
net asset value as of these dates or with respect to any future
indicative or prospective results which may vary.
(1) Represents GAAP equity attributable to us as of each
respective date.
(2) Based on closing share price on each date (or if such
date was not a trading day, the immediately preceding trading day)
and the number of shares owned by the Holding Company as of each
respective date.
(3) Amounts based on market comparables due to lack of
material trading volume, valued at 9.0x Adjusted EBITDA for the
three months ended March 31, 2023 and
December 31, 2022.
(4) Subsequent to March 31,
2023, a significant tenant of a commercial high-rise
property was notified of default for non-payment. The tenant stated
they are unable to cure the default status and the lease has been
terminated. We consider this default, along with other facts and
circumstances, a triggering event for potential impairment and we
will assess this long-lived asset for any non-cash impairment
charges during the second quarter of 2023. As of March 31, 2023, this property had a NAV of
$218 million and any potential
impairment cannot be estimated at this time.
(5) Amounts based on market comparables due to lack of
material trading volume, valued at 14.0x Adjusted EBITDA for the
three months ended March 31, 2023 and
December 31, 2022.
(6) On January 31, 2023, a
subsidiary of Icahn Automotive, IEH Auto Parts Holding LLC and its
subsidiaries ("Auto Plus"), an aftermarket parts distributor held
within our Automotive segment, filed voluntary petitions in
the United States Bankruptcy
Court. As a result, IEP deconsolidated Auto Plus, writing down its
remaining equity interest to zero which is offset by the
recognition of a $188 million related
party note receivable which is reflected in Other Holding Company
net assets. The total impact to NAV for Q1 2023 was a reduction of
$193 million.
(7) Management performed a valuation on the owned
real-estate with the assistance of third-party consultants to
estimate fair-market-value. This analysis utilized property-level
market rents, location level profitability, and utilized prevailing
cap rates ranging from 6.8% to 8.0% as of March 31, 2023 and December 31, 2022. The valuation assumed that
triple net leases are in place for all the locations at rents
estimated by management based on market conditions. There is no
assurance we would be able to sell the assets on the timeline or at
the prices and lease terms we estimate. Different judgments or
assumptions would result in different estimates of the value of
these real estate assets. Moreover, although we evaluate and
provide our Indicative Net Asset Value on a regular basis, the
estimated values may fluctuate in the interim, so that any actual
transaction could result in a higher or lower valuation.
(8) Holding Company's balance as of each respective date,
excluding non-cash deferred tax assets or liabilities. With respect
to March 31, 2023, the distribution
payable was adjusted to $70 million,
which represents the actual distribution paid subsequent to
March 31, 2023.
(9) Holding Company's balance as of each respective date.
Investor Contact: Ted Papapostolou, Chief Financial
Officer
(305) 422-4100
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SOURCE Icahn Enterprises L.P.