Carl Icahn Settles SEC Charges He Hid Billions in Loans Backed by Company Stock

When the National Football League’s Raiders get a yellow flag, they get set back 15 yards. For the world’s most famous corporate raider, it’s more like $1.5 million.

Famed activist investor Carl Icahn agreed to pay $500,000, and his Icahn Enterprises $1.5 million, to settle civil charges from the SEC claiming he failed to disclose pledging-company stock as collateral on personal loans.

Tale of the Tape: Activist Short-Seller vs. Activist Investor

Icahn is one of the world’s most famous investors, who rose to prominence as a “corporate raider” in the 1980s after he led a hostile takeover of Trans World Airlines and sold off its assets to repay debts. A failed hostile takeover bid of US Steel followed. Through the ‘90s, his reputation mellowed out to an “activist investor” focused on whipping companies into shape and boosting shareholder value.

The SEC, however, said Icahn wasn’t giving shareholders the full picture. The regulator charged him with pledging around 51% to 82% of Icahn Enterprises shares outstanding to secure billions in margin loans without disclosing this to shareholders or the SEC. Icahn and his company agreed to settle the charges; they did not admit wrongdoing. In fact, they immediately lashed out at the activist market player that may have landed them here:

• The SEC launched an inquiry into Icahn last year after activist short-selling firm Hindenburg Research accused Icahn of “Ponzi-like” behavior in a report. What it found was that Icahn Enterprises failed to disclose Icahn’s pledges of its securities, which began in 2018, until 2022, and that Icahn failed to file mandatory amendments to filings until last year.
• Icahn and his company dismissed Hindenburg’s “false report” Monday, asserting their settlement doesn’t mention “a ‘Ponzi-like’ structure” and concerns an “unrelated disclosure violation.”

Shake it Off: Shares in Icahn Enterprises fell over 5% in early-morning trading, but rebounded later in the day, ultimately gaining 1%. There’s one ship short-seller Hindenburg couldn’t bring down.