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Carl Icahnthe renowned billionaire investor, plans to increase his company’s stake in the venture CVR Energy, Inc. (NYSE:CVI), while the dividend payout was significantly reduced.
What happened: Icahn Companies (NASDAQ:IEP), the investment company controlled by Icahn, is proposing to increase its stake in CVR Energy by more than 20%. The move is aimed at capitalizing on what Icahn sees as an undervalued market, The Wall Street Journal reported, citing draft statements.
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The company plans to achieve this by purchasing up to 15 million additional shares, expanding its ownership to more than 81% of CVR’s shares.
Despite the recent decline in CVR’s share price, Icahn Enterprises believes the company is undervalued and shareholders would benefit from a premium payout. To finance this transaction and future investments, Icahn Enterprises plans to halve its dividend payout.
This is the second time the company has cut its dividend since a short-seller report questioned the dividend’s valuation and sustainability. Icahn, who owns most of IEP’s shares, 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 company’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, which led to a significant decline in its share price.
Despite these challenges, Icahn remains optimistic about the market’s potential, citing “great opportunities for activists” in undervalued situations.
Earlier this year, Icahn Enterprises settled a charge with the U.S. Securities and Exchange Commission for failing to disclose billions in personal loans pledged against Icahn Enterprises’ securities. Under the settlement, Icahn and his firm were required to pay $1.5 million and $500,000 in civil penalties.
