Carl Icahn is locked in a battle against his own kind

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At 87, Carl Icahn has plenty of experience in brutal campaigning. But the one he finds himself in now is a little different from previous confrontations — and not just because he’s the target, not the activist.

May’s beginning,

Icahn Enterprises

(ticker: IEP) was reported by short seller Hindenburg Research. The firm, best known for its breakups of Nikola (NKLA) in 2020 and India

Adani Enterprises

(512599.India) earlier this year argued that Icahn Enterprises is overvaluing its holdings in private companies, allowing it to trade at a premium to its net asset value, while similarly structured activist funds negotiate at a discount.

In recent years, funds run by activist investors Nelson Peltz, Dan Loeb and Bill Ackman have faced activists, but their attackers have sought to improve operations and boost stocks. Icahn Enterprises faces a short seller. Hindenburg does not support Icahn’s success, but hopes to profit from the fall in stocks.

Loeb and Ackman were targeted by Asset Value Investors in 2021 and 2019, respectively, with AVI arguing that the funds needed to do more to reduce the discount between their share price and their underlying assets. Both funds prevailed. More recently, in 2022, Peltz shut down a London-listed investment vehicle after investors called for a board change, arguing the fund was deviating from its strategy.

Short activism is “intrinsically different” from traditional long activism, an investment banker who wished to remain anonymous told Barrons. In long activism, the target company and the activist are usually aligned to increase shareholder value, which would be mutually beneficial. “How they get there is a matter of debate,” the banker added.

So far, Hindenburg seems to have the upper hand. Shares of Icahn Enterprises have fallen more than 30% since Hindenburg’s May 2 report, and the investment firm revealed on Wednesday that it faces a regulatory probe. Icahn Enterprises did not respond to a request for comment, but said in regulatory filings it was cooperating with the investigation.

As for what this recent wave of activists against activists means for the industry, some on Wall Street expect the trend to continue in light of more challenging market dynamics including high inflation and rising rates. rising interest. Activists generally avoid chasing their own because they might need those other activists’ votes in future campaigns, said Patrick Gadson, co-director of Vinson & Elkins’ shareholder activism practice. Barrons.

“When you’re dealing with all things hedge fund managers, you’re also dealing with huge personalities — very well-deserved, oversized egos — but they’re still huge egos. And they have long memories,” Gadson said. “When things are going well, of course, [activists] will make sure they don’t cross the waterways, but when things get choppy, maybe they can’t play by those rules anymore.

Just warn hedge funds with publicly traded guns.

Write to Carleton English at carleton.english@dowjones.com