Carl Icahn speaks at the launch of Alpha on September 13, 2016 in New York.
David A. Grogan | CNBC
Carl Icahn’s investment company, Icahn Enterprises, has won a lawsuit alleging it artificially inflated its stock price by issuing unsustainably high dividends to help the billionaire investor take out massive personal loans.
In a ruling Friday, U.S. District Judge K. Michael Moore in Miami said the shareholders in the proposed class action had failed to show the company made material misrepresentations or omissions and did so with fraudulent intent.
Attorneys for the shareholders did not immediately respond to requests for comment. A spokesman for Icahn Enterprises did not immediately respond to a similar request. Moore gave shareholders until Oct. 14 to file an amended complaint.
Icahn Enterprises shares have fallen more than three-quarters since May 2023, when short-selling firm Hindenburg Research questioned its dividends and Icahn’s borrowing, accusing Icahn of overseeing a “Ponzi-like economic structure.”
Last month, Icahn agreed, without admitting wrongdoing, to pay $2 million to settle civil charges from the U.S. Securities and Exchange Commission that he failed to disclose significant debt against the stock.
Shareholders said the true health of Icahn Enterprises became clear as its Auto Parts Plus business collapsed, the company cut its dividend and Icahn renegotiated loans.
Icahn owns about 85% of the company’s stock and has personally lost billions of dollars as the stock price plummets.
In his 28-page ruling, Moore cited the company’s statements that it might cut dividends and said Carl Icahn’s general disclosures about borrowing were enough to alert investors to the risks.
He also said that Icahn Enterprises disclosed Carl Icahn’s stake pledges in its 2021 annual report and that there was no allegation that any of the defendants engaged in insider trading.
“This conduct indicates that the individual defendants, including Icahn, believed in the long-term value of the IEP and is inconsistent with the theory that the defendants engaged in a scheme to artificially inflate the stock price for personal gain,” Moore wrote.
The case is Kosowsky v Icahn Enterprises LP et al, U.S. District Court, Southern District of Florida, No. 23-21773.
