(Reuters) -Carl Icahn’s investment firm Icahn Enterprises won the dismissal of a lawsuit alleging it artificially inflated its stock price by issuing unsustainably high dividends to help the billionaire investor obtain large amounts of personal loans.
In a ruling Friday, U.S. District Judge K. Michael Moore in Miami said the shareholders in the proposed class action failed to show that the company made material misrepresentations or omissions and did so with the intent to defraud.
Attorneys for the shareholders did not immediately respond to requests for comment. A spokesperson for Icahn Enterprises did not immediately respond to a similar request. Moore gave shareholders until October 14 to file an amended complaint.
Shares of Icahn Enterprises have fallen by more than three-quarters since May 2023, when short-selling firm Hindenburg Research questioned its dividends and Icahn’s loans, accusing Icahn of overseeing a “Ponzi-like economic structure.”
Last month, without admitting wrongdoing, Icahn agreed to pay $2 million to settle a civil charge brought by the U.S. Securities and Exchange Commission for failing to disclose his significant borrowing against the stock.
Shareholders said the true health of Icahn Enterprises became apparent when its Auto Parts Plus business went bankrupt, the company cut its dividend and Icahn renegotiated its loans.
Icahn owns about 85% of his company’s stock and personally lost many billions of dollars when the stock price fell.
In his 28-page decision, Moore cited the company’s disclosures that it could cut dividends and said the general disclosures about Carl Icahn’s loans were enough to alert investors to the risks.
He also said that Icahn Enterprises’ 2021 annual report disclosed Carl Icahn’s stock commitments and that there were no allegations that any defendant committed insider trading.
“This conduct suggests that the individual defendants, including Icahn, believed in the long-term value of IEP and is inconsistent with the theory that defendants engaged in a scheme to artificially inflate the stock price for personal gain,” Moore wrote.
The case is Kosowsky v. Icahn Enterprises LP et al, US District Court, Southern District of Florida, No. 23-21773.
