Proactive Investors - Billionaires Carl Icahn and Bill Ackman have had a long-running rivalry on Wall Street, to say the least.
In the latest twist to the billionaire feuding, Pershing Square (NYSE:SQ) founder Bill Ackman has warned that his investment firm’s rival, Icahn Enterprises, could prove to be another Archegos, a hedge fund which imploded two years ago wiping out $10 billion from the trading profits of some of the world’s biggest investment banks.
According to Reuters, prosecutors said Archegos misled banks in the six months before its famous March 2021 demise about its liquidity and how concentrated its portfolio was, in order to borrow money and make huge bets on stocks through total return swaps.
Pershing Square billionaire Ackman said he was “fascinated” by the accusations made by Hindenburg Research against Icahn Enterprises, and in particular the discovery of personal loans taken out by Icahn and secured against the depositary units in his investment holding, since it could prove “highly unstable.”
In early May, Hindenburg accused Icahn Enterprises of overvaluing its holdings and relying on a “Ponzi-like” structure to pay dividends. In a nutshell, the short seller accused Icahn, of employing “Ponzi-like” tactics of paying off existing retail investors with unsustainably large dividends funded by new investors buying its stock exchange-listed depositary units.
I have been fascinated by the @HindenburgRes $IEP situation, and there are some interesting learnings here. For example, one learns from $IEP that a controlling shareholder of a company with a small float that pays a large dividend can cause his company to trade at a large…— Bill Ackman (@BillAckman) May 24, 2023
Ackman concluded the tweet by referencing one of Icahn’s favorite sayings, “If you want a friend, get a dog.”
Then the Icahn nemesis took it a step further: “Over his storied career, Icahn has made many enemies. I don’t know that he has any real friends. He could use one here.”
Icahn, 87, refused to comment on why Ackman was needling him, although reports suggest a statement could be in the works.
Bill Hwang’s Archegos Capital management is now being prosecuted for fraud by the Securities and Exchange Commission, which warned that even a single hedge fund like Archegos “can have far-reaching implications for investors.”
Over the last few decades, billionaires Icahn and Ackman they have traded insults, squabbled over companies and even engaged in a lengthy court battle, where Ackman was eventually awarded $9 million.