Carl Icahn admits mistake with bearish bet that cost $9bn

‘If I kept the parameters I always believed in . . .  I would have been fine,’ concedes activist

‘If I kept the parameters I always believed in . . .  I would have been fine,’ concedes activist

Carl Icahn: ‘Maybe I made the mistake of not adhering to my own advice in recent years’ Carl Icahn admits mistake with bearish bet that cost $9bn on twitter

Carl Icahn has admitted he was wrong to make a huge bet that the market would crash after the ill-fated trade cost his firm nearly $9bn over roughly six years.

According to a Financial Times analysis, the prominent activist investor lost about $1.8bn in 2017 on hedging positions that would have paid out if asset prices had tumbled before losing a further $7bn between 2018 and the first quarter of this year.

“I’ve always told people there is nobody who can really pick the market on a short-term or an intermediate-term basis,” Icahn told the FT in an interview to discuss the analysis. “Maybe I made the mistake of not adhering to my own advice in recent years.”

Icahn Enterprises started aggressively betting on a market collapse in the aftermath of the 2008 financial crisis and became increasingly bolder in subsequent years, deploying a complex strategy that involved shorting broad market indices, individual companies, commercial mortgages and debt securities.

At times, Icahn’s notional exposure, the underlying value of the securities he was betting against, exceeded $15bn, regulatory filings show. “You never get the perfect hedge, but if I kept the parameters I always believed in . . . I would have been fine,” he said. “But I didn’t.”

Icahn Enterprises, the listed vehicle majority owned by the activist that allows retail investors to join in his wagers, reported a total of $4.3bn in short losses in 2020 and 2021 as markets quickly rebounded from the pandemic slump following the Federal Reserve’s huge stimulus.

“I obviously believed the market was in for great trouble,” said Icahn. “[But] the Fed injected trillions of dollars into the market to fight Covid and the old saying is true: ‘don’t fight the Fed’.”

The trades have left Icahn in a vulnerable position and threaten to undermine his status as one of the most feared activist investors on Wall Street.

Earlier this month, short seller Hindenburg Research released a report saying it believed the market value of Icahn Enterprises was inflated and its dividend was unsustainable. Shares of the company have fallen by more than 30 per cent since the report was published.

As Icahn’s short bets drained billions of dollars from his investment firm, he ploughed nearly $4bn of his own money into his publicly listed vehicle, filings show. That injection helped keep the firm’s internally calculated investment portfolio value relatively stable.

Icahn exposed himself to another risk by taking out a margin loan that was first disclosed in early 2022. Hindenburg’s report drew attention to the margin loan from Morgan Stanley, against which Icahn pledged 60 per cent of his stake in Icahn E