Publications
Publications
- September 2023 (Revised January 2024)
- HBS Case Collection
Icahn Enterprises: Ponzi Scheme or Sound Investment
By: Aiyesha Dey, Jonas Heese and James Weber
Abstract
Icahn Enterprises, a publicly traded limited partnership founded and operated by famed activist investor Carl Icahn, had earned above market returns for over a decade. Between 2018 and early 2023, it had a compound annual return of 31%. Icahn invested in undervalued companies and then publicly pressured boards of directors to make changes to increase the share price.
Hindenburg Research (Hindenburg), an activist short-selling investment firm founded by Nathan Anderson, took short positions in companies it felt were overvalued, published research reports to drive down the stock price, and then profit from the decline.
In May 2023, Hindenburg published a report claiming that Icahn Enterprises stock price was overvalued by 75%, that its 15% dividend yield was not sustainable, and that it sustained itself through a Ponzi-like economic model by issuing new stock to new investors so it could pay dividends to existing investors.
Would Icahn Enterprises continue to outperform the market or was it a Ponzi disaster waiting to happen?
Hindenburg Research (Hindenburg), an activist short-selling investment firm founded by Nathan Anderson, took short positions in companies it felt were overvalued, published research reports to drive down the stock price, and then profit from the decline.
In May 2023, Hindenburg published a report claiming that Icahn Enterprises stock price was overvalued by 75%, that its 15% dividend yield was not sustainable, and that it sustained itself through a Ponzi-like economic model by issuing new stock to new investors so it could pay dividends to existing investors.
Would Icahn Enterprises continue to outperform the market or was it a Ponzi disaster waiting to happen?
Keywords
Citation
Dey, Aiyesha, Jonas Heese, and James Weber. "Icahn Enterprises: Ponzi Scheme or Sound Investment." Harvard Business School Case 124-013, September 2023. (Revised January 2024.)