(Bloomberg) — Carl Icahn’s holding company authorized a buyback equaling almost 27% of its shares trading on the open market, potentially boosting the stock price as the financier feuds with a short seller.
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Icahn Enterprises LP’s board of directors approved a $500 million buyback on May 9, according to a regulatory filing. It marks the first time the company, which invests in a wide range of businesses, has adopted a formal share repurchase program since 1987, public documents show.
The filing also revealed that Icahn increased the number of shares pledged to secure his personal debt. More than half of the firm’s shares are now pledged to secure his margin loans. The company didn’t reply to messages seeking comment.
Icahn Enterprises’ shares have lost more than a third of their value since short seller Nate Anderson’s Hindenburg Research released a report last week claiming the company was overpriced, contending it found evidence of inflated asset evaluations. Icahn, 87, has a record of waging corporate battles, including one with billionaire investor Bill Ackman over Herbalife Ltd. that captivated Wall Street a decade ago.
Based on Wednesday’s closing price, the buyback would permit Icahn Enterprises to repurchase about 15.5 million shares, or almost 27% of the publicly traded float. Depending on how it’s conducted, a buyback of that magnitude could jump-start Icahn Enterprises’s stock price, potentially squeezing short sellers such as Hindenburg.
The repurchase authorization is for an indefinite period, according to the filing, and doesn’t expire until it’s terminated by the board. The company can buy back the stock for cash in the open market through tender offers or in privately negotiated transactions.
Risk Factor
While the company has roughly 369 million shares outstanding, Icahn controls more than 84% of the stock through affiliates. That leaves about 58 million shares, worth about $1.86 billion, to trade on the open market.
Icahn has pledged more than three times the publicly traded float to secure his margin loans, according to the filing, which revealed the increased number of pledged units under a new company risk factor. More than half of Icahn Enterprises’ total outstanding shares are pledged to secure Icahn’s personal debt.
As of Monday, Icahn had pledged 206 million shares currently worth about $6.2 billion, up from about 168 million shares in February.
Icahn owns his shares through intermediaries whose lenders include Morgan Stanley and Deutsche Bank AG, according to filings. It’s not clear if those loans are the same as the margin loans referred to in Icahn Enterprises’ filings.
After Icahn Enterprises tumbled last week, Ackman tweeted that there was a “karmic quality” to Hindenburg’s short position at his rival’s company. Ackman ultimately exited his $1 billion short position on Herbalife after Icahn squeezed him by buying millions of shares in the nutrition company.
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