Shares of Icahn Enterprises LP (NASDAQ: IEP) fell sharply on Monday following news that share price dilution was imminent, deepening a sell-off that has been ongoing since February. In fact, data from S&P Global Market Intelligence shows that Icahn Enterprises stock fell 11.6% as of 2:51 p.m. EDT on Friday, hitting a two-decade low.

Of course, other factors also contribute to this ongoing weakness.

The saga of Icahn Enterprises continues

Put simply, Icahn Enterprises is a holding company comprised of several private and publicly traded for-profit companies. Although he is neither president nor CEO, notorious activist investor (and majority owner) Carl Icahn largely runs the organization.

Today’s share price drop is the result of a filing with the U.S. Securities and Exchange Commission (SEC) that Icahn Enterprises intends to sell up to $400 million in newly issued shares. Although the money raised from this sale is earmarked for “potential acquisitions and limited partnership purposes” that would theoretically benefit existing shareholders of this $6.6 billion company, the market fears that this will actually result in a dilution of current shareholders’ positions.

However, the timing of the decision simply does not cast a good light.

If the name sounds familiar, there are a number of possible reasons. The most recent of these is the recent fine imposed by the U.S. Securities and Exchange Commission (SEC) on Icahn Enterprises and Carl Icahn himself for failing to disclose that they had personally profited from Lombard loans that used the company’s own stock holdings as collateral. Although the matter only cost Icahn $2 million in civil penalties, it is still a red flag.

Icahn Enterprises is also in the midst of a legal battle with Nate Anderson, founder of Hindenburg Research, a “forensic financial research” firm that makes short-selling recommendations based on findings that appear irregular or even illegal. In May, Anderson published a report claiming that Icahn inflated the valuation of his assets to continue to fund his sizable dividend payments. Carl Icahn rejects the premise of the Hindenburg report, but the stock’s performance since then suggests that at least some investors are considering the possibility that Anderson’s conclusions may be accurate. Today’s announcement underscores their concerns

Whatever the case, such drama makes share prices very vulnerable to even the slightest signs of trouble. Today’s seemingly dilutive announcement is one such sign.

The story continues

Just stay away

And that may be the most important takeaway from Monday’s collapse. Icahn Enterprises may have some attractive new investments in store. Its outsized dividend could be sustainable. Its enigmatic figurehead could be an innocent victim of unfair assumptions. Nobody knows…at least not yet.

From a risk management perspective, there is nowhere near enough potential to justify the risk presented by so many unknowns. Drama is usually unwelcome in any investment, if only because it is distracting. What is even worse is when some of the concerns raised may end up being justified.

Put more simply, most investors shouldn’t try to catch this falling knife. There’s a reason this stock has been falling for over a decade now, even if it’s not entirely clear. What this is the reason.

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James Brumley does not own any stocks mentioned. The Motley Fool does not own any stocks mentioned. The Motley Fool has a disclosure policy.

Why Icahn Enterprises stock fell over 11% today was originally published by The Motley Fool.