On news that a potentially resource-draining lawsuit against the company had been dismissed, units of master limited partnership Icahn Enterprises (NASDAQ: IEP) leaped almost 15% in price on Monday. This occurred on a rather sleepy trading session for stocks, with the S&P 500 index only bumping 0.1% higher.
A good day in court
Before market open, Icahn Enterprises announced — no doubt with immense satisfaction — that a district court judge had dismissed the suit. In the legal action, the company’s chairman and namesake Carl Icahn was accused of defrauding its unitholders in order to obtain significant amounts of personal loans.
That accusation came shortly after a report published by short-seller Hindenburg Research that said Icahn and company management had committed a range of transgressions.
The famed activist investor, who owns 85% of Icahn Enterprises, was quoted by his company as saying after the verdict, “We are pleased that the spurious claims of various unscrupulous characters, working together in a coordinated and clandestine network, have been debunked.”
The company and Icahn also took the opportunity to assert that the veteran investor has no intention of selling Icahn Enterprises units. Following the publication of a recent financial prospectus by the company, speculation had been rife that Icahn would raise money via unit sales.
Doubts will remain
Icahn Enterprises’ unit price took a lasting hit after the Hindenburg Research report was disseminated by the market. This indicates that more than a few market players take the allegations seriously. While the ruling by the court is indisputably positive for the company, it’s probable that some of those doubts will linger, and limit the potential for future pops in the price.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
