Carl Icahn speaks at Delivering Alpha in New York on September 13, 2016.
David A. Grogan | CNBC
Carl Icahn’s investment company, Icahn Enterprises, has won the dismissal of a lawsuit that alleged it artificially inflated stock prices by paying unsustainably high dividends so billionaire investors could take out big personal loans.
U.S. District Judge K. Michael Moore in Miami said in a ruling Friday that shareholders in the proposed class action lawsuit had failed to prove the company made material misrepresentations or omissions or did so with fraudulent intent.
The shareholders’ lawyers did not immediately respond to a request for comment. A spokesman for Icahn Enterprises did not immediately respond to a request for comment. Moore has given the shareholders until Oct. 14 to file an amended complaint.
Icahn Enterprises shares have fallen by more than three-quarters since May 2023, when short-seller Hindenburg Research questioned the company’s dividends and Mr. Icahn’s borrowings, accusing him of overseeing a “Ponzi-like economic structure.”
Last month, Icahn was sued by the Securities and Exchange Commission for failing to disclose large amounts of borrowing secured by shares, but agreed to pay $2 million to settle the case without admitting wrongdoing.
Shareholders said Icahn Enterprises’ true health became apparent when its Auto Parts Plus business collapsed, the company cut its dividend and Mr. Icahn renegotiated its loans.
Icahn owns about 85% of the company and has personally lost billions of dollars as the stock price has fallen.
In his 28-page ruling, Judge Moore cited the company’s disclosures that it might cut its dividend and said Carl Icahn’s general disclosures about the borrowings were enough to warn investors of the risks.
He also said Carl Icahn’s stock pledge was disclosed in Icahn Enterprises’ 2021 annual report and there were no allegations that the defendants engaged in insider trading.
“This conduct suggests that the individual defendants, including Icahn, believed in the long-term value of IEP and is consistent with the notion that the defendants engaged in a scheme to artificially inflate the stock price for their own personal gain,” Moore wrote.
The case is Kosowsky v. Icahn Enterprises LP et al, U.S. District Court, Southern District of Florida, Case No. 23-21773.
