Carl Icahn hit with SEC fine in wake of Caesars stock speculation

In its consent order, the SEC said that over the last five-plus years, Icahn took out several personal loans worth billions of dollars from various lenders. For those loans, he pledged “approximately 51% to 82% of IEC’s outstanding securities” as collateral.

As controlling shareholder of IEC, Icahn should have made Schedule 13D filings to disclose the loans and collateral. He did not do so until July 2023. For these shortcomings, Icahn was fined $500,000 (£384,825/€450,982 ) and IEC was fined $1.5m.

The margin borrowing was highlighted in a May report from fellow activist investors Hindenburg Research. Analysts said at the time that IEP shareholders “deserve this information in order to understand the risk of margin calls should IEP unit prices revert toward NAV, a reality we saw (and still see) as inevitable.”

According to the consent order, Icahn amended and consolidated the borrowings after the report was published. No wrongdoing was admitted or denied as part of the settlement.

Fines come after Caesars stake is disclosed

The SEC probes comes after the 88-year-old was again linked to Caesars Entertainment earlier this year. In May, reports began circulating that Icahn had rebuilt another sizeable stake in the casino operator. In an interview with CNBC, he said, “I like Caesars and I own some stock,” but he asserted he was not attempting another activist takeover.

SEC filings through the end of June show that the actual size of the stake is approximately 2.44 million shares. Based on Caesars’ total of approximately 215 million shares, that means his stake is about 1.1%.

Beginning in 2018, Icahn began building a position in Caesars that eventually grew to 25%. He managed to secure three board seats and heavily lobbied for the company to sell. It ultimately did sell to Eldorado Resorts in July 2019. The $17.3bn cash and stock deal closed a year later.

The merged company kept the Caesars brand but implanted mostly Eldorado executives, including current CEO Tom Reeg. After the sale closed, Icahn cashed out and sold off his holdings. Given his comments and the size of the stake, it appears unlikely that Icahn will repeat that process.

In Q2, Caesars posted overall revenue of $2.83bn, a 1.7% year-on-year decrease. Its digital segment was positive, as revenue increased 27.8% to $276m. The segment also saw adjusted EBITDA reach an all-time high of $40m, just one year after becoming EBITDA-positive for the first time.