Icahn to Increase Stake in CVR Energy
Billionaire investor Carl Icahn, through his company Icahn Enterprises (NASDAQ: IEP), plans to double down on his investment in CVR Energy (NYSE: CVI) by increasing his stake from 66% to over 80%. This strategic move will be facilitated by a tender offer of 15 million shares at $17.50 each, representing a 6% premium over the company’s Thursday closing price, according to sources cited by The Wall Street Journal (WSJ).
Icahn’s team is expected to release official statements detailing this decision. The investment aligns with Icahn Enterprises’ view that CVR Energy remains undervalued, even as the energy company maintains a market cap of approximately $1.7 billion. Icahn appears poised to capitalize on what he perceives as CVR’s growth potential and unrecognized value.
Dividend Halved to Fund CVR Investment
To fund this expanded stake in CVR Energy, Icahn Enterprises will cut its dividend in half, marking the second dividend reduction in less than a year. The prior cut in August 2023 followed a sharp decline in Icahn Enterprises’ stock value in the wake of a short report by Hindenburg Research in May. The report had put considerable pressure on the company, leading to the initial dividend reduction to $1 per share. The latest dividend cut will provide the necessary liquidity for Icahn to proceed with his ambitious investment plans in CVR.
This strategic choice reflects Icahn’s prioritization of long-term asset value in CVR over immediate shareholder payouts, indicating his commitment to reinforce his position in the energy company amid current market conditions.
Upcoming Q3 Financial Results and Market Impact
Icahn Enterprises is also scheduled to report its third-quarter earnings on Friday, and investors are eagerly awaiting insights into the company’s recent performance, especially in light of these strategic moves. The decision to further reduce dividends may not sit well with all shareholders, as some have voiced concerns about the frequency of dividend cuts since August.
However, Icahn’s focus remains fixed on value generation through increased ownership in CVR Energy, which he views as a stronger long-term investment. Analysts suggest that Icahn’s latest move may be an attempt to consolidate control over CVR, aiming to influence its strategic direction and unlock further value. The market response to these announcements will likely hinge on the company’s Q3 results and the potential gains that Icahn’s expanded stake in CVR Energy could bring to Icahn Enterprises.
