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Hello and welcome, you are 
listening to Patrick boil on 

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dot-org. 
Carl Icahn has had a long career

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We're in markets, starting out. 
As a stockbroker in 1961 later, 

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becoming a risk. 
Our Band 2 options Trader in the

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70s and 80s. 
He was in notoriously, corporate

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Raider. 
He was accused of being an asset

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stripper. 
The worst kind of stripper in 

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his dealings with TWA today. 
He's a notoriously activist 

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investor known for forcing. 
Even the most respected CEOs to 

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bend to his will, like apples, 
Tim Cook, who he pressured to 

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Turn Capital to investors to a 
share buyback. 

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In 2014 some of icons earliest 
Arbitrage trades involved 

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investing in closed-end. 
Mutual funds, a type of 

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investment company, which often 
trades at a discount to the 

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value of the assets. 
They hold he would then agitate 

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for the fun to liquidate 
yielding, a profit icon who has 

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spent his whole career on 
offense now finds himself 

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playing defense. 
As another activist investor. 

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Hindenburg research is claiming 
that icons 18 billion dollar 

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market cap holding company, icon
Enterprises has a Ponzi. 

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Like economic structure. 
That is sustained only to the 

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extent that new money coming in 
is willing to risk being the 

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last holding. 
The bag in brief icon is accused

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of using money taken in from new
investors to pay out, dividends 

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to Old investors and Accused of 
doing this to keep the stock 

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price High stock that he has 
pledged as collateral for a 

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margin loan. 
Hindenburg is a short selling 

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activist hedge fund run by Nate 
Anderson and earlier this year, 

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I covered their allegations 
against adani. 

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Group Anderson, is most famous 
for having released a video of 

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Nickolas electric truck, 
prototype being towed, up a hill

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in order to be pushed down to 
make a promotional. 

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Video showing that the 
technology was fully 

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operational. 
Trevor Milton, the CEO of Nicola

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ended up being convicted of 
fraud based partially upon this 

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evidence. 
Hindenburg have recently been in

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the press for taking aim at 
beard enthusiasts Jack. 

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Dorsey's payments company block 
at the end of 2020 to the net 

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asset value of Icon. 
Enterprises was marked at five 

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point six billion dollars. 
Let's market value was 18 

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billion dollars. 
This is quite a surprising 

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premium icon Enterprises has two
unusual features one is that it 

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has a very high dividend yield 
and the other is that around 88 

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percent of its shares or units 
are held by Carl Icahn anti son 

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Brett, who typically take their 
dividends in shares, rather than

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cash, the dividend is only paid 
out in cash. 

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To the twelve percent or so of 
outside. 

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Investors Hindenburg says that 
icon Enterprises funds. 

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This dividend through continuous
share sales rather than the cash

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flow of its investment 
hintonburg. 

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Describe their view of this 
alleged Arrangement, as Ponzi 

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like prior to the release of the
Hindenburg report icon, 

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Enterprises had a 15 percent 
dividend yield, the stock fell 

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40. 
Send when the report was 

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released earlier this week, the 
declining share price means that

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the yield has rocketed to over 
25%. 

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The fall in the unit price has 
knocked around five billion 

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dollars off. 
The net worth of Carl Icahn and 

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Carl is 87 years old right now 
and losing five billion dollars 

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at this stage in his career is 
likely to severely impact his 

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retirement. 
So most investors in trying To 

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work out if a stock is 
overvalued or not. 

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Firstly check. 
If Cathy wood has a large 

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position in the stock and 
secondly check to see if Jim 

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Cramer has recently called it a 
by we get mixed signals here. 

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As Kathy doesn't seem to own it 
and Kramer says, I think it 

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absolutely is going to be a 
winner, right? 

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You got 40 percent, yield call 
icon but I will not recommend 

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stock so that I don't know 
what's in it. 

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Just it just has to turn the 
show. 

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I don't know what's in that fun.
I can't recommend. 

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I don't know is a can't 
recommend from Kramer good or 

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bad. 
It's hard to say. 

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Maybe he wants to recommend but 
he just can't we'll never know. 

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I guess we'll just have to look 
in Greater detail at the 

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accusations. 
There's no shortcuts today. 

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The main tree claims being made 
by Hindenburg are firstly that 

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the units are overvalued 
relative to their reported net 

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asset value. 
And this has happened because 

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retail investors are I'm dazzled
by the high dividend yield. 

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Secondly, Hindenburg or implying
that the dividend itself is 

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somewhat fraudulent because it's
not funded by earnings. 

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But instead by selling new stock
to retail investors, thirdly, 

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they claim to have uncovered 
evidence that icon Enterprises 

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overvalue. 
Some of its less liquid assets, 

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when calculating the net asset 
value, I mean, what is it? 

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A black stone real estate fund. 
Finally, they're saying that I 

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can make poor Investments that 
have negative operating cash 

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flows, which further, shrink the
asset value, and makes the 

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different unsustainable 
Hindenburg claimed to have 

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uncovered evidence of inflated 
valuation marks being used for 

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some of the less liquid and 
private assets included in the 

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holding company. 
They give the example that IEP 

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owned 90% of a publicly-traded 
meat. 

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Packaging business, that it 
valued a 243 million dollars at 

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year end, when the listed 
company had a market value of 

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only 89 million dollars at the 
time. 

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Hindenburg claim that IEP were 
marking. 

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The value of this illiquid stock
who stock price can be observed 

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in the market, 204 percent 
above, the prevailing public 

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market price, the report states 
that IEP marked its Automotive. 

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Parts division, a 381 million 
dollars in December, 20 22 and 

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that its key subsidiary declared
bankruptcy a month later, you're

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not really meant to do that. 
They take shots at Icon 

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stock-picking to saying our 
analysis of icons, latest 

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December twenty, twenty two, 
thirteen at filing indicates 

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that, IEPs long Holdings have 
lost approximately four hundred 

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and seventy 1 million. 
In dollars in value, 

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year-to-date, despite the SP 
gaining. 

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Approximately nine point two 
percent over the same time 

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frame, they estimate that IEPs. 
Current nav is closer to 4.4 

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billion dollars or twenty two 
percent lower than its disclosed

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year-end indicative. 
Now, have a five point six 

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billion dollars suggesting that 
units were trading at a three 

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hundred and ten percent premium 
to not have would an Dividend 

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rate of 64% of now have in their
report, Hindenburg calls at 

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Jeffrey's. 
The only brand name, Investment 

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Bank, that publishes research on
icon Enterprises. 

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They highlight the Jeffries. 
Also helps the company to sell 

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its stock. 
Where is Credit. 

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Suisse when you need them, the 
report says, in essence 

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Jeffries, is luring in retail 
investors through its research 

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arm, under the guise of IEPs. 
Safe dividend while also selling

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billions in IEP unit through its
Investment Banking arm to 

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support the very same dividend. 
They say that Jeffries has run 

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all 1.7 billion dollars of Icon 
Enterprises at the market stock 

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offering since 2019 icon. 
Enterprise has responded to the 

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criticism by saying that it 
stood by its disclosures the 

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press release says I believe the
self-serving short seller report

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published by Hindenburg research
today. 

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Was intended solely to generate 
profits on Hindenburg short 

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position at the expense of. 
IEPs long-term bag holders, 

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sorry unit holders, not bike 
holders, there. 

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They're holding unit anyhow, the
Hindenburg report highlights 

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that icon has taken out margin 
loans on out. 

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Icahn Enterprises meaning that 
he's borrowed money using his 

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stock as collateral. 
The report says that he's 

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pledged around 60% of his IEP 
Holdings for personal margin 

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loans. 
If the stock were to continue to

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fall icon, could be forced to 
sell stock to meet margin calls,

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which could push the stock price
down even further. 

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They point out icon has not 
disclosed the details of these 

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margin loans, like loan. 
Value maintenance thresholds. 

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So there's no way of knowing 
when he could be forced to sell 

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in many ways. 
The allegations against icon are

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very similar to the allegations 
Hindenburg made against adani 

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group. 
Earlier this year a company that

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is mostly family-owned which is 
being accused of manipulating up

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its price in order to borrow 
money and to issue stock at 

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inflated values Hindenburg 
additionally points out That IEP

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is highly levered with 5.3 
billion dollars in dead and 

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maturities of 1.1 billion, 1.36 
billion and 1.35 billion do with

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in 2024, 20, 25 and 20 26 
respectively. 

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They point out that most closed 
and holding companies trade, 

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close to their net asset value, 
or at a discount to their knobs.

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The report highlights for That 
Vehicles run by other star 

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managers like Dan Loeb, and Bill
Aikman traded discounts of 14% 

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And 35% to not respectively. 
As I mentioned earlier, icon 

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used to break up. 
This type of company to extract 

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the value associated. 
With these discounts, 

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conglomerate companies are 
really any holding company 

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entity, that's a grab bag of 
many other businesses including 

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structures like closed. 
And funds typically trade and 

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often trade for decades of time 
at a discount to their net asset

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values. 
This is the case even in 

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situations where the portfolio 
itself is holding clearly 

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identifiable assets with 
well-known Market valuations, 

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sometimes they're holding shares
in publicly listed companies. 

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There is in fact, an entire 
valuation method used in 

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corporate finance called some of
the parts valuation. 

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Which exists to Value. 
Conglomerate Style holding 

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entities. 
And it's well understood that 

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market valuations are often well
below. 

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The sum of the parts valuations 
in part because investors apply 

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a discount to these businesses 
due to concerns about 

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management. 
Waste concerns that management 

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might misuse retained earnings 
for malinvestment to retain 

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control over as large business 
as possible investors are Also 

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concerned about the timing of 
capital returns to shareholders 

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the timing of sales of elements 
of the underlying portfolio to 

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worrying that the holding 
company management will sell at 

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the worst possible time in the 
future or about tax uncertainty 

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around future dispositions. 
When Hindenburg compared icon 

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Enterprises to all 526 US, based
closed-end funds in Bloomberg. 

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Database IEPs premium to nav was
higher than all of them and more

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than double the next highest 
that they found. 

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So look, the term Ponzi like 
economic structure, it does 

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sound bad. 
It's frankly over 100 years 

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since we've heard anyone really 
speaking well of a Ponzi like 

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economic structure. 
And that's mostly because it's 

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been over 100 years. 
Since Charles Ponzi was put in 

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prison for his scheme. 
Essentially, the Accusation that

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Hindenburg is making is that the
shares trade for more than 

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they're worth. 
And for this reason, icon is 

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selling additional shares for 
more than they are worth to the 

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public in order to pay a big 
dividend to shareholders. 

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I mean, it's basically just a 
meme stock, if people will pay 

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more for your shares than 
they're worth, it probably makes

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sense to sell additional shares 
to people who are willing to 

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overpay for them, at least icon 
has restrained. 

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Himself from behaving like Adam 
Moran and doing interviews in 

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his underwear to keep the stock 
price elevated. 

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Matt Levine from Bloomberg. 
Argues that the way this 

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structure works Carl Icahn is 
the majority owner of a bag of 

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cash and he keeps giving other 
people some of the cash in 

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exchange for an increasing 
ownership stake, in a shrinking 

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bag of cash Levine points. 
Out, that Carl is himself taking

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the risk of becoming Coming the 
last one holding the bag. 

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Of course he is borrowed against
the overvalued unit. 

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If the stock fell enough in 
value to the point of which it 

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started trading at a discount, 
now have call could stop selling

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new shares as he wouldn't want 
to sell them at a discount to 

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not have, but he could keep 
paying shareholders a dividend 

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and paying himself in shares in 
order to increase his ownership 

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in the now. 
Undervalued bag of cash it Quite

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a game. 
We shouldn't forget. 

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The management fees associated. 
With this structure, either Carl

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Icahn. 
And his management team are 

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charging around 2% annually on 
the funds now have or over a 

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00:15:14,008 --> 00:15:17,800
hundred million dollars per year
for running the holding company.

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I was a bit amused by how hard 
it was to dig the management 

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fees out of the investor 
presentation that's available 

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online, but I found an SEC 
filing where they avoid the use 

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of the term. 
Fees. 

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Instead, they use the term 
special profits, interest 

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allocations, which range from 
one and a half percent to two, 

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and a quarter percent per annum.
And then there are the incentive

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allocations, which must be a 
performance fee, which ranges 

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from 15 percent. 
In some cases subject, to a 

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preferred return, to 22 percent 
per annum. 

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So, let's call it a 22 and 23 
structure. 

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You can. 
Hopefully see how Such a fee 

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structure management. 
Might be tempted to exaggerate 

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the nav of the partnership. 
As that's what they charge fees 

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on hindenburg's argument is that
this stock trades at a 200 to 

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300 percent premium, to its net 
asset value, which is 

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surprisingly High, especially 
for something that has not been 

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identified as a meme stock, and 
it's hard to argue with them. 

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On the point that there has been
remarkably little discussion. 

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Ian of this premium, now that 
this is being widely discussed. 

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I think the stock can reasonably
be expected to start trading. 

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Either closer to its nav, which 
might mean margin calls for Carl

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00:16:43,600 --> 00:16:47,800
or he could start doing meme 
stock CEO stuff to pump the 

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price back up. 
We've learned over the last few 

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00:16:50,800 --> 00:16:55,300
years that there's no need for a
price to be grounded in economic

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00:16:55,300 --> 00:16:59,000
reality. 
If the CEO can mean well enough.

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This is Possibly the best 
strategy for Carl right now. 

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00:17:03,700 --> 00:17:08,800
Issuing, an mft seems very 2022 
to me, but the stock has fallen 

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around 40% since the report came
out, leaving lots of room to 

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sell more units at a premium to 
not have to fund. 

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00:17:16,900 --> 00:17:21,800
Maybe a dividend hike icon, 
Enterprises isn't a standard 

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meme stock. 
It's a boomer meme stock and so 

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00:17:25,300 --> 00:17:28,300
420 jokes. 
And then ft's might be badly 

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00:17:28,300 --> 00:17:31,800
suited to that generation. 
Nation, but a dividend hike 

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might just do the trick. 
I'm not sure though. 

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I'm a bit out of date on the 
mechanics of meme stock pumping,

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00:17:39,100 --> 00:17:43,000
but if you have any suggestions 
do let me know in the comment 

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00:17:43,000 --> 00:17:46,100
section. 
Hindenburg did find one 

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prominent endorser of their 
report Bill Aikman of Pershing 

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00:17:50,600 --> 00:17:54,900
Square who famously clashed with
icon over the prospects of 

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00:17:54,900 --> 00:17:59,000
Herbalife, the supplements 
company that Aikman had shorted 

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00:17:59,000 --> 00:18:02,400
many years. 
Go the two billionaires famously

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00:18:02,400 --> 00:18:07,100
argued about it on. 
CNBC in 2013, they appeared to 

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have since made peace but Bill 
Aikman tweeted about 

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00:18:10,700 --> 00:18:13,300
hindenburg's report when it came
out. 

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There's a karmic quality to this
short report that reinforces the

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notion of a circle of life and 
death as such. 

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It's a must read. 
Thanks for tuning in to today's 

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00:18:24,900 --> 00:18:27,300
podcast. 
If you found it interesting, 

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00:18:27,300 --> 00:18:29,500
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special. 

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00:18:32,400 --> 00:18:35,700
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Have a great day and talk to you

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00:18:38,900 --> 00:18:40,200
again soon. 
Bye. 

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00:18:41,200 --> 00:18:44,300
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