Carl Icahn, the renowned billionaire investor, is planning to increase his firm’s stake in CVR Energy, Inc. (NYSE:CVI) while significantly reducing its dividend payout.
What Happened: Icahn Enterprises (NASDAQ:IEP), the investment firm controlled by Icahn, is proposing to increase its stake in CVR Energy by over 20%. This move is aimed at capitalizing on what Icahn perceives as an undervalued market, reported The Wall Street Journal, citing drafts of statements.
The firm plans to achieve this by purchasing up to 15 million additional shares, raising its holdings to over 81% of CVR’s shares.
Despite the recent drop in CVR’s share price, Icahn Enterprises believes the company is undervalued and that shareholders would benefit from a premium cash-out. To fund this transaction and future investments, Icahn Enterprises plans to cut its dividend payout in half.
This is the second time the firm has reduced its dividend since a short-seller report challenged the company’s valuation and dividend sustainability. Icahn, who owns most of IEP’s shares, has dismissed the report as misleading.
Icahn Enterprises and CVR Energy did not immediately respond to Benzinga‘s request for comment.
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Why It Matters: Icahn’s decision to increase his firm’s stake in CVR Energy comes at a time when the company is facing challenges. CVR Energy recently announced the suspension of its third-quarter dividend, leading to a significant drop in its share price.
Despite these challenges, Icahn remains optimistic about the market’s potential, citing “great opportunities for activists” in undervalued situations.
Earlier in the year, Icahn Enterprises settled charges with the U.S. Securities and Exchange Commission for failing to disclose billions worth of personal loans pledged against Icahn Enterprises’ securities. The settlement saw Icahn and his firm pay $1.5 million and $500,000 in civil penalties.
Despite these legal challenges, Icahn has continued to make significant moves in the market. In May, he built a sizable position in Caesars Entertainment, and in October, he amended his cooperation agreement with Southwest Gas.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
