- Hindenburg Research unveiled its short position against Carl Icahn's holding company on Tuesday.
- In a new report, the firm alleges Icahn Enterprises has used "inflated" asset valuations.
The shorter seller that took on Asia's richest man is targeting the business empire run by another billionaire: Carl Icahn.
Hindenburg Research, which earlier this year released a scathing report on Indian conglomerate Adani Group, unveiled its short position against Icahn Enterprises on Tuesday. It claims the Wall Street legend's holding company has used inflated asset valuations and has been run like a Ponzi scheme.
Reasons Hindenburg gives for its short position include:
"(1) IEP trades at a 218% premium to its last reported net asset value (NAV), vastly higher than all comparables (2) we've uncovered clear evidence of inflated valuation marks for IEP's less liquid and private assets (3) the company has suffered additional performance losses year to date following its last disclosure."
The report also says that Icahn's firm has used new investor money to pay old investors in a structure akin to a Ponzi scheme.
"In brief, Icahn has been using money taken in from new investors to pay out dividends to old investors. Such Ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one 'holding the bag'."
Shares of Icahn Enterprises plunged nearly 20% shortly after the opening bell, trading at $41.49 at 10:05 a.m. ET.
Icahn Enterprises did not immediately respond to Insider's request for comment.
"Overall, we think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well," the report concludes.
Hindenburg's report on Gautam Adani's company shaved billions off of its market cap and resulted in a huge blow to the billionaire's net worth.
Hindenburg accused the company of "brazen stock manipulation" and "accounting fraud" in its report in January. A few months later, the short seller revealed that it was also targeting payments company Block, claiming that it was peddling inaccurate user metrics for its Cash App service to mislead investors.