Copyright BusinessAMBE

2023 so far has been anything but a banner year for Icahn Enterprises, the investment company of investor-activist Carl Icahn. A scathing report by the shortseller Hindenburg on the company caused its share price to tumble by about 45 percent compared to the beginning of the year. He has now struck a deal with banks on a decoupling of his loans from the trading price of Icahn Enterprises.

Carl Icahn, the investor activist famous for forcing numerous major stock market companies to make policy changes, came under fire himself in May after Hindenburg published a report showing that several parts of the investment group, and therefore the entire company, were significantly overvalued.

In the news: After months of negotiating with his lenders, Icahn has reached an agreement with them on outstanding debts. The .

  • For starters, his loans will be decoupled from Icahn Enterprises' stock price. This will prevent Icahn from getting a margin call if his investment company's stock price drops further. According to , the investor activist has given some 60 percent of his stake in Icahn Enterprises as security for margin loans for "unspecified purposes."
    • If creditors determine that those shares are underperforming, they can demand that Icahn increase the guarantee or close certain positions. So in that case, it is referred to as a margin call.
    • The above agreement should reduce pressure on the stock price by eliminating fears of forced sales of shares to satisfy margin calls.
    • Investors are already reacting positively. Icahn Enterprises was quoted nearly 15 percent in the plus before trading hours.
  • According to some Wall Street Journal sources, Icahn did agree to increase its collateral. That will total $6 billion, of which $2 billion will be own funds.
  • Finally, he will repay his loans within three years. He has agreed to an installment plan for that purpose. It totals $3.7 billion.
    • In September, he will repay $500 million. This will be followed by eight quarterly payments totaling $87.5 million. Over the next three years, he will also repay the remaining $2.5 billion to the banks.

Financial hangover

Recap: Icahn recently acknowledged in an interview with the Financial Times that he made some wrong investment choices. These have his investment firm nearly

  • According to an analysis by the U.S. news site, the investor activist lost about $1.8 billion in 2017 due to short positions (which an investor uses to speculate on price declines), before losing another $7 billion between 2018 and the first quarter of this year.
  • Icahn had been a firm believer since the 2008 financial crisis that another crash would not be long in coming. That led the investor activist to adopt a strategy that speculated on a demise of the stock markets.
    • "I was convinced that the market was in big trouble," Icahn said. "But the Fed was injecting trillions of dollars into the economy to fight COVID, and the old saying is true: Don't fight the Fed."
  • When Icahn Enterprises released its quarterly results in May, the investment company announced that the U.S. Attorney's Office for the Southern District of New York is investigating. Although Icahn Enterprises added that that would not have a major impact on the company.

© The Content Exchange, source News