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Icahn Enterprises settles with SEC over disclosure issues

Published 19/08/2024, 18:16

IEP
-0.74%

Icahn Enterprises L.P. (NASDAQ:IEP), a diversified conglomerate, has reached a settlement with the U.S. Securities and Exchange Commission (SEC) regarding non-disclosure of certain financial dealings of its chairman, Carl C. Icahn. The SEC's order, issued on Monday, found that the company did not adequately disclose that Icahn had pledged IEP securities as collateral for personal margin loans in its annual reports for the years 2018 through 2020.

As part of the settlement, which neither admits nor denies the SEC's allegations, Icahn Enterprises has agreed to pay a civil penalty of $1.5 million and to cease and desist from future violations of Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1. Carl Icahn himself consented to a separate order, which includes a $500,000 civil penalty and a cease-and-desist from future violations of Section 13(d)(2) of the Exchange Act and Rule 13d-2(a).

The initial inquiry into IEP's affairs began with a contact from the U.S. Attorney’s office for the Southern District of New York on May 3, 2023, followed by the SEC's Division of Enforcement on June 21, 2023. Since responding to the U.S. Attorney’s initial inquiry, IEP has not had substantive communication with the office.

In other recent news, Icahn Enterprises reported mixed results for Q2 2024. The company acknowledged a decrease in net asset value and varied performance across different sectors.

Despite a decline in the energy segment's EBITDA and reduced consumer spending affecting automotive sales, the firm maintains confidence in its long-term strategy, particularly in improving margins in the service business.

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Icahn Enterprises' net asset value dropped by $969 million in Q2, with the energy segment's EBITDA falling to $46 million due to lower refining margins and a fire incident at the Wynnewood refinery.

However, the automotive segment's EBITDA saw a slight increase due to cost-cutting measures, despite a $42 million decrease in net sales. The company's liquidity remains strong, with $4.4 billion in cash and investments at the holding company level.

These recent developments also include management's focus on enhancing service business margins and filling vacant store locations. A capital plan to modernize equipment in North American plants is under consideration to reduce waste.

However, the company experienced an 8.1% negative return for the funds during the quarter, and Russian sanctions led to an $8 million revenue decline in the fiber sales business. Despite these challenges, Icahn Enterprises remains confident in its long-term performance and the potential for margin improvement in the service business.

InvestingPro Insights

In light of Icahn Enterprises L.P.'s (NASDAQ:IEP) recent settlement with the SEC, investors may find it useful to consider the company's financial health and market performance. According to InvestingPro data, Icahn Enterprises has a market capitalization of approximately $7.58 billion. Despite a challenging environment, as indicated by a revenue decline of 12.31% in the last twelve months as of Q2 2024, the company maintains a significant dividend yield of 23.56%, showcasing its commitment to returning value to shareholders. This is further supported by the fact that Icahn Enterprises has maintained dividend payments for 20 consecutive years, a testament to its financial durability.

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InvestingPro Tips suggest that while analysts anticipate a sales decline in the current year, they also predict the company will be profitable this year. This juxtaposition of expectations may offer a nuanced outlook for investors. The company's valuation implies a strong free cash flow yield, which could be a sign of underlying value not reflected in the share price. For investors seeking more detailed analysis, there are 11 additional InvestingPro Tips available, offering deeper insights into Icahn Enterprises' financials and market position.

The company's significant dividend despite recent challenges and the expectation of net income growth this year could be indicators of resilience and potential for long-term investors. For those looking to make informed decisions on IEP, additional insights can be found at https://www.investing.com/pro/IEP.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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