Is It Wise To Take On Carl Icahn? | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, VSG, Taylor, and Carlisle discuss Is It Wise To Take On Carl Icahn?. Here’s an excerpt from the episode:

Tobias: So, first cab off the rank IEP. Have you taken a look at IEP? You ever taken a look at that?

VSG: Icahn.

Tobias: That’s Icahn’s. Just let me back up a little bit. Icahn Enterprises, I think it’s a– [crosstalk]

Jake: It’s a holding company.

Tobias: It’s a funny structure. It’s a limited partnership that the units trade in.

VSG: Oh, you’re talking about– So, IEP is Icahn, an entity that’s listed that de-runs.

Tobias: Yeah.

VSG: Oh, okay. I have looked at that before. Yeah.

Tobias: It’s got a funny collection for– [crosstalk]

Jake: Yeah. It’s a closed end fund.

VSG: I did a back test on it once and I saw a horrific drawdown it had from 2008 through 2010, and it had an 80% drawdown or something crazy. But it seems like he’s back now. He’s returned to those all-time highs.

Tobias: Has he really? Yeah, it tends to do that. It runs up and down. MLP, yeah, thank you, Chris Backes says, “MLP.”

VSG: Oh.

Tobias: Hindenburg has written a short report on IEP. Have you guys followed that at all? Have you looked at it?

Jake: I just saw the tweet that was saying that– Questioning the marks within the portfolio and then also the fact that it’s trading way over NAV. So, you got– [crosstalk]

Tobias: Two ways to lose.

Jake: Yeah. Overly optimistic and also, maybe the marks are– And also, apparently fair amount of debt inside of it and maybe even some leverage on Icahn’s personal balance sheet borrowed. And apparently, it’s Ponzi-ish in its cash flows in that they’re doing at the money issuance, but also paying huge dividends. So, you have a little bit, like, pay the old investors with the new investor’s money situation, possibly. So, I don’t know. It’s provocative.

Tobias: The last time I looked at it was like 90 something percent owned by Icahn, and his distributions are in units in the trust rather than cash. So, he’s just cementing his holding on it. That would make it hard to short, wouldn’t it?

VSG: I like him.

Jake: I feel like, boy, you are playing with fire if you try to go at him in any way, and especially if he’s holding a lot of the deck of cards. I don’t know.

VSG: Yeah, he’s so vocal. I would not want to have him be my enemy. [laughs] If you’re listening, Carl, I love you. No offense. [laughs]

Tobias: Yeah. Even if it’s fundamentally overvalued and it’s a good short, it’s still technically a very tough thing to short, because he controls so much of it. He can go out and talk about it at any point in time and tear your face off, but I just wondered if it was good marketing by Hindenburg.

VSG: It sounds shady [laughs] based on all the facts we just heard. I wouldn’t want to be long it. That’s for sure.

Tobias: No, that’s right. I’ve looked at it lots of times. You want to own it when it’s bombed out. Not when it’s run all the way up.

VSG: Plus, with those MLPs, you get those annoying K-1 tax forms.

Tobias: Oh, yeah. That’s right.

VSG: You have to decide if it’s worth the pain of having all of your taxes super complicated and have to pay your CPA more money. [laughs]

Jake: Yeah, no doubt. Usually, no.

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